Cristiano Ronaldo being sued for 7 billion is due to who caused his ‘ten years of zero’?

Why is Cristiano Ronaldo being sued for 7 billion? The reason behind his 'ten years of zero'?

Source: Xiao Sa lawyer

For a long time, from cryptocurrency to NFT, mainstream virtual asset service providers (hereinafter referred to as “VASPs”) have been constantly adding various new gameplay, increasing the value of cryptocurrencies or NFTs, and using special external marketing methods to retain existing users and attract new ones. Among them, paid promotion is a common method used by VASPs.

Of course, paid promotion is not unique to the virtual asset industry. As early as the early stages of human market economy development, “advertising” emerged as an early form of paid promotion. Today, with the active development of human commercial activities, the model of paid promotion has evolved into various new forms, with emerging social media paid promotion becoming mainstream. However, due to the tightening regulation of virtual assets in various countries, such paid promotion poses different legal risks for celebrity endorsers, promotion platforms, and VASPs.

The Xiao Sa team noticed that on one hand, a while ago, a certain platform faced a crisis and chose to settle at a high price, and on the other hand, football superstar C. Ronaldo faced a collective lawsuit due to endorsing that platform, with a claim amount exceeding 1 billion US dollars. If the court supports the plaintiff’s claim, C. Ronaldo may lose most of his income from the past 10 years. Today, starting from C. Ronaldo’s lawsuit, the Xiao Sa team will explain in detail the legal risks of celebrity endorsement in promoting virtual assets.

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01 Virtual Asset Paid Promotion: A disguised celebrity “killer”?

Following celebrities such as Stephen Curry, Larry David, Kim Kardashian, and Naomi Osaka, C. Ronaldo also fell into the pit of paid promotion of virtual assets. Recently, C. Ronaldo faced a collective lawsuit for endorsing virtual assets through long-term cooperation with a certain platform, and was required to compensate at least 1 billion US dollars (approximately over 7 billion RMB based on the exchange rate on the date of publication). If the judge “rules as requested” in this case, it will not only result in C. Ronaldo giving away most of his income from the past 10 years, but also create another milestone case in the history of virtual assets – the highest compensation claim against a celebrity due to paid promotion of virtual assets.

A few days ago, three plaintiffs filed a collective lawsuit in the United States Southern District Court of Florida against C. Ronaldo, Formula 1, Mercedes-Benz, and Major League Baseball, among other well-known individuals and legal entities, with a claim amount exceeding 1 billion US dollars. The plaintiffs alleged in the complaint that celebrities like C. Ronaldo and organizations with high social fame and influence as endorsed by the platform misled them into making large and unsafe investments, and their actions are suspected of “fraud” and violate several U.S. laws regarding the promotion of financial products. The lawsuit also directly points fingers at C. Ronaldo himself: there is evidence that the success of the fraudulent issuance and sale of unregistered securities by the platform is directly related to C. Ronaldo’s assistance.

So, as a long-time player in the virtual asset circle and a celebrity who made a fortune during the NFT frenzy, did Cristiano Ronaldo really help promote virtual assets for certain security? What specific assistance did he provide? According to the plaintiff’s lawsuit, Ronaldo’s cooperation and promotion with the security was “very successful.” Before last year’s World Cup, Ronaldo collaborated with the security to launch his first personal NFT project “CR7.” The sale price of the NFTs in this project ranged from $77 to $10,000. After Ronaldo’s NFT project was announced, online searches with the keyword “security” increased by 500%. At the same time, Ronaldo’s high-priced NFTs sold out in the first week.

However, now, the Safesister team has found that Ronaldo’s NFT project has lost most of its liquidity and the prices have dropped significantly, with the cheapest ones being sold for just a few dollars. It can be seen that the plaintiff’s lawsuit is not unreasonable. If people really did invest in such a high-risk investment under the strong influence of Ronaldo’s fan base, then the current investment losses are undoubtedly related to Ronaldo, and it is reasonable to demand compensation.

02. Will Ronaldo really pay 1 billion?

First, let me give you the answer. The Safesister team believes that the compensation amount is likely to be significantly reduced.

I suppose everyone has already seen the recent high-profile settlement case between the security and the U.S. Securities and Exchange Commission (SEC). Although the case did not ultimately enter a judgment and the judge did not make a determination on the legal nature of virtual currency and other virtual assets, based on the settlement conditions of both parties, it seems that the SEC has the upper hand. In other words, in the current judicial environment in the United States, virtual assets are more likely to be recognized as a type of security or quasi-security financial product.

Based on the determination that virtual assets belong to securities or quasi-security financial products and that the security is the issuer of virtual assets, the SEC has identified the security’s two most important “crimes”: (1) providing and selling encrypted asset securities Tronix (TRX coin) and BitTorrent (BTT coin) to the public without proper registration; (2) engaging in wash trading, fraud, and manipulation in the cryptocurrency secondary market through a large number of wash trading transactions.

Therefore, before considering whether Ronaldo should pay and how much, we must clarify one point: Is Ronaldo the issuer of this virtual asset? Does he bear the obligation of information disclosure and so on?

I have to say that most of the time when VASPs issue virtual assets with the theme or gimmick of famous people, they deliberately blur the issuer’s identity in their marketing and promotion. Common promotional texts may say “This platform collaborates with Mr. A to issue the xx project” or “This company and Miss B jointly created the xx project,” but in reality, VASPs may have only signed an endorsement or authorization contract with Mr. A or Miss B’s talent agency, using the celebrity effect to boost their own NFT project. In this case, the issuer of the virtual asset is only the VASP, and Mr. A and Miss B are simply advertising spokespersons.

In other words, VASP, as the issuer and seller of virtual assets, is the entity that truly bears the legal obligations of financial institution compliance, such as information disclosure. In the specific case of C Ronaldo, An is the issuer and C Ronaldo is the advertising spokesperson. Certainly, investors may have engaged in high-risk investments under the influence of C Ronaldo’s endorsement. However, the true cause of consumer losses is the improper issuance of unregistered securities by An, market manipulation, and failure to fulfill statutory information disclosure obligations. Therefore, C Ronaldo is not the main responsible party for consumer losses.

Furthermore, the Sa Team would like to remind everyone that both the lack of liquidity in C Ronaldo’s NFT project and the price plunge of other virtual assets issued by An cannot be entirely attributed to C Ronaldo or the issuer, An, in terms of the law. Looking at precedents in securities dispute cases, judges must also consider the impact of “systemic risks” on investor losses when determining the amount of compensation. For example, the volatile fluctuations in the virtual asset market and the negative effects arising from global economic instability on the virtual asset industry.

Taking all factors into account, even if C Ronaldo loses the lengthy lawsuit, the compensation amount will most likely be significantly reduced. Furthermore, due to the presence of numerous co-defendants, the liability for compensation may be further “diluted”.

03 What legal risks may be faced when promoting virtual assets for payment in China?

After discussing the lawsuit against C Ronaldo, we should also consider whether celebrities who promote virtual assets for payment in China could face exorbitant claims.

Many people believe that since the release of the “Notice on Further Preventing and Dealing with Risks Associated with Virtual Currency Trading Speculation” and the “Notice on Rectifying “Mining” Activities of Virtual Currency,” all virtual currency-related institutions and businesses have already withdrawn from the mainland Chinese market, and thus the occurrence of fines for paid promotion of virtual assets is unlikely. However, this is not entirely true. The concept of virtual assets is quite extensive, and in addition to virtual currency, NFTs, and other derivative products, even the virtual currencies and equipment on gaming platforms, although legally distinct from virtual assets based on blockchain technology, may still subject celebrities accepting such paid promotions to serious legal risks.

Article 56 of China’s Advertising Law states: In the case of false advertisements for goods or services that affect consumer life and health, the advertising spokesperson shall bear joint liability with the advertiser for any consumer losses caused. The article also stipulates that in the case of false advertisements for goods or services other than those mentioned above that cause consumer losses, if the advertising spokesperson knowingly or should have known that the advertisement is false but still recommends or endorses it, they shall bear joint liability with the advertiser, advertising operator, and advertising publisher.

In general, virtual assets are not commodities or services related to life and health. Therefore, when virtual assets issued by a VASP (Virtual Asset Service Provider) cause investors to suffer losses, endorsers will not generally bear joint liability for non-fault damages due to their endorsement activities. However, if endorsers are subject to subjective fault (knowing or should have known that there are problems with the virtual assets issued by the VASP), they will bear joint liability for damages along with the VASP (advertiser), advertising operator, and advertising publisher.

In judicial practice, China currently has a relatively loose standard for determining whether a celebrity “knows or should have known” that a product has problems. In April 2016, the “Zhongjin series” investment and wealth management products went bankrupt, causing heavy losses to tens of thousands of investors. After the case, many investors pointed fingers at Pan (a famous snooker player known as the “Billiard Queen”), the advertising endorser for the “Zhongjin series,” and filed lawsuits against her. In the judgment of this case [(2020) Shanghai 02 Civil Final Judgment No. 3552], the judge made it clear: “When evaluating Pan’s fault, the standard of the duty of care should be based on the duty of care of an ordinary person, and should not be inferred backward based on the results of subsequent criminal cases. Just like a large number of participants who are victims of the pooled funds, if Pan fulfilled the duty of care of an ordinary person and examined the situation of the advertiser, she should not be subjected to a higher duty of care.”

However, the SAF team reminds that the standard for determining fault in celebrity endorsement in civil compensation is different from that in administrative penalties. Celebrities may be able to avoid consumer claims, but they still need to be subject to strict supervision by market regulatory agencies. On May 28, 2022, well-known actress Jing was determined by the Tianhe District Market Supervision Administration of Guangzhou City to have violated the Advertising Law for endorsing a fruit and vegetable product suspected of false advertising, and was fined a total of 7.2212 million yuan (approximately $1.1 million).

04 Final Thoughts

As mentioned earlier, Cristiano Ronaldo may not go broke due to this lawsuit, but he may not be able to escape the punishment of the U.S. market regulatory authorities. The U.S. Federal Trade Commission Act has stipulated that paid promotions on the internet must make clear disclosures in promotional tweets. The level of disclosure needs to reach the specific amount of money received.

In a case where paid promotion of virtual assets was subject to administrative penalties, American socialite Kim Kardashian is a typical example: Kardashian collaborated with a VASP to promote a cryptocurrency on social media and was fined $1.26 million. At that time, Kardashian had already clearly noted in her tweet that the promotion was an advertisement, but she did not disclose that she received $250,000 in promotional fees. Cristiano Ronaldo is also likely to face scrutiny and punishment by regulatory authorities for the same reason. In conclusion, the SAF team advises that paid promotion of virtual assets is risky, and celebrities should be cautious about participating.

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