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Tesla workers describe racism that led California’s lawsuit

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Warning: This story quotes several racist slurs allegedly directed at Black workers at Tesla’s California plant, according to a lawsuit filed against the company.

A single mother was excited to land a job at Tesla. About three years in, she was fired, she said, after complaining that Black workers were frequently called the N-word on the assembly line.

A former refinery worker couldn’t wait to get into green energy. She said she soon found herself and other Black workers assigned to the most arduous tasks in a corner of the factory co-workers called “the plantation.”

An Army veteran was promoted to a fleet manager job. He said he was fired after he complained that his boss called him and two Black co-workers “monkeys.”

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In interviews with The Times, three Black former employees described how jobs at the pioneering automaker devolved into personal nightmares due to a pattern of rampant racism and harassment at Tesla’s Fremont, Calif., factory.

Their accounts expand on allegations in a Feb. 9 lawsuit filed by the California Department of Fair Employment and Housing on behalf of more than 4,000 current and former Black workers at the world’s most valuable car company — the largest racial discrimination suit ever brought by the state by number of workers affected.

The three former employees describe a workplace where racist slurs in English and Spanish were often aimed at Black employees by co-workers and supervisors, as alleged in the lawsuit. They say Tesla segregated Black workers into separate areas, gave them the hardest tasks and routinely denied them promotions.

And they allege that when they informed the company about racist treatment, their complaints went ignored or they were fired.

Tesla disputed the former employees’ accounts, stating that the three workers did not complain to the company about racism and that any discipline they received was the result of their own workplace behavior.

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“Race plays no role in any of Tesla’s work assignments, promotions, pay or discipline,” attorneys for the company said in a statement. “Tesla prohibits discrimination, in any form.”

‘We are the crabs in the barrel’

Monica Chatman was a single mother working two jobs, as a grocery store stocker and a FedEx driver, when she landed at Tesla in late 2016.

At first, Chatman, then 32, didn’t mind the schedule — mandatory 12-hour shifts, six or seven days a week. “I’m a workaholic,” she said. “I’ve worked since I was 14.”

At Tesla’s orientation, “they said if you do the work, you can succeed and this is the best job you’ll ever have,” she recalled.

Tesla’s car factory in Fremont, Calif., where three Black former employees described how jobs at the pioneering automaker devolved into personal nightmares due to a pattern of rampant racism and harassment.

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(David Butow / For The Times)

For $19.50 an hour, Chatman drove a cart and later a forklift on the night shift, hauling parts to assembly lines.

She was paid overtime but said she became exhausted and resented that she had no choice but to agree to it in order to keep her job. “There was a time where I worked three months straight — no days off.”

African American workers were routinely assigned the hardest tasks, Chatman said, “the work nobody wanted to do — that was more wear and tear on the body.”

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Tesla is “modern-day slavery,” she said, echoing claims she made as part of a class-action lawsuit. “And we are the crabs in the barrel.”

Chatman’s first supervisor, a white woman, transferred four South Asian men to a different route after they had worked as a team hoisting half-shafts, carpets and brake lines. She told Chatman to take over.

“I was a skinny 115 pounds,” Chatman recalled. “I said, ‘You’re telling me to do a four-man job by myself?’ Her words were: ‘Do the job or lose your job.’”

At one point, Chatman’s blood pressure dropped and she briefly fainted on her cart. Sitting for a while at a medical station, she still felt weak. She asked to go home to recuperate, but said she was threatened with termination.

So Chatman stayed for what she recalled as “the worst night of my life.”

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Besides the unequal assignment of factory tasks, verbal harassment was a daily affliction, Chatman said. Driving back and forth, she said in the declaration filed with the lawsuit, she would hear Latino and white workers, and their supervisors, casually refer to Black workers with the N-word. “You would hear n— this and n— that,” she said. ”It was the norm. It was Tesla’s tradition.”

Chatman didn’t hear Asian workers use the N-word, she said, but they “would make chicken jokes,” a stereotype mocking of Black Americans’ diet.

A Latino colleague who worked as a supervisory lead taunted her frequently, she said. Once, on her way back from the restroom, she heard him bark into a walkie-talkie, “Monica needs to get her Black ass over here.”

Another time, she said, she heard him tell a group of workers, “Monica and them n— up there — they don’t do s—. All they do is sit on their ass all day.”

Reached by telephone, the lead declined to answer any questions.

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After that, Chatman said, she filed a racial harassment complaint with Rose Sanson in Tesla’s human resources department. During several meetings with HR, she also complained about job discrimination — not just how she was assigned a four-person shift, but how she and other Black workers were being segregated in “the nastiest, most uncomfortable area” of the factory where it was “freezing cold” in winter, she said.

The Times reached out to Sanson by email and telephone. She did not respond.

Tesla’s billionaire chief executive, Elon Musk, would come through the front of the factory “with his entourage,” Chatman said. “They didn’t want a Black face up there,” she said, adding that Latino colleagues were left up front while Black workers were moved to the back.

After her HR complaint, Chatman said, she was no longer harassed. She said the lead was fired after complaints from multiple workers. But she soon saw him back at the factory, rehired in a non-supervisory job.

As months passed, no matter how hard she worked, Chatman was denied routine performance reviews, which often lead to raises and promotions. She would train new workers and see them promoted over her.

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“I was blackballed,” she said.

A year later, in September 2019, Chatman hit a sprinkler head as she was driving down an aisle. That shut down an assembly line for 15 minutes.

She was fired.

But weeks before that, another driver had kept his job after crashing into five sprinklers “pop, pop, pop,” she said, tracking her claims in the declaration. In a separate multi-sprinkler incident, she said, a worker wasn’t fired despite causing a flood that shut down a line for hours.

“I had never had an accident all those years,” Chatman said. “But they were waiting for me to make a mistake.”

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In a statement, Tesla said her termination stemmed from the incident, which it called a “serious safety violation.” Tesla denied Chatman was required to work three months without a day off and said she received reviews as well as monetary performance rewards.

The company stated it was the lead “who first complained about Ms. Chatman’s abusive behavior, only to be met with her reactionary complaint days later. Nevertheless, Tesla promptly investigated Ms. Chatman’s complaint and interviewed multiple witnesses, none of whom corroborated her complaint.”

Lawrence Organ, Chatman’s attorney in a class-action suit against Tesla, said the company’s allegations are “the same tactic” it has used to counter other complaints by Black workers, including a case brought by a Black elevator operator. In October, a federal jury awarded that worker $137 million after finding the company turned a blind eye to racial taunts and offensive graffiti.

“Instead of attacking the victims of racism at their facility, Tesla should focus on taking remedial actions designed to end the racist conduct,” Organ said.

Tesla did not respond to a request for Chatman’s time cards, HR complaint or personnel records. Chatman’s attorneys said they also have not gotten those documents from the company.

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‘I was at my breaking point’

In 2017, Kimberly Romby was working as a rotating construction safety attendant at San Francisco Bay Area oil refineries, but she wanted a more stable job.

The 38-year-old applied to Tesla and was hired as a materials handler, hoisting 40-pound packages of auto parts onto forklifts and carts, and driving them through the factory to assembly lines.

The job paid $18 an hour and entailed six- or seven-day weeks, with 12-hour shifts. The overtime was mandatory.

“I wanted to be part of the green energy movement,” she said. “It was the future — a career that was going to take me a long way.”

Within weeks, she said, two young Latino co-workers began harassing her with homophobic slurs after she mentioned she had a wife.

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A woman wears a dark hoodie sweatshirt with flames printed on the back.

Kimberly Romby, a former Tesla employee, says Black workers at the company’s Fremont plant were segregated into a crowded corner of the factory without air conditioning.

(Paul Kuroda / For The Times)

The two men would laugh at her and regularly referred to Black workers with racist slurs in English and Spanish, she said. When she objected, they would say “Shut up, n—.”

She complained to her supervisor, who was white, and also to HR, but said she saw no evidence of any follow-up. Tesla said Romby never complained about racial slurs or discrimination.

In March, after Romby had suggested safety improvements on forklift routes that were then implemented, she was honored with a performance award certificate at a staff recognition luncheon.

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She said that only made co-workers jealous, and the harassment escalated.

After her complaints to HR, Romby said, she was shifted to a more strenuous route, where she had to lift as many as 100 heavy packages a day without help. Non-Black workers on that route worked in pairs, she said.

During downtime at the factory, when parts or trucks were delayed and line work slowed, only Black workers were ordered to do “general cleaning,” Romby said, getting on their hands and knees to scrub floors and wipe beneath shelves, while white and Latino employees were allowed to take rest breaks.

On the assembly line, Black workers were given the most arduous jobs, such as installing dashboards, she said.

When, as a result, Black workers caused bottlenecks or mistakes, Romby would overhear supervisors say, “Them n— over there … they’re lazy.’ But they were working as hard as anyone,” she said. She reported the slur in her complaint to the state.

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Workers called Tesla’s factory “the plantation,” and “the slave ship,” not just for the brutal work pace that everyone experienced, but especially because Black workers were routinely segregated into a corner of the factory that lacked air conditioning and work conditions were most crowded, Romby said.

At Tesla's factory in Fremont, Calif.

A welder works on a Tesla vehicle at the Fremont, Calif., factory in 2015.

(David Butow / For The Times)

“There were hardly any white workers over there. It was hell in the summer.”

Romby’s complaints to human resources officials only led to her being shifted to different departments where harassment would continue, she said.

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By December 2018, she said, “I was at my breaking point.” She visited a psychologist at Kaiser Permanente and took a month’s medical leave because of stress.

While away, she wasn’t paid because hours after filing papers for the leave, HR emailed her that she was “under investigation for supposedly threatening someone,” she said. Baffled, she asked whom she had threatened, and was told it was someone on the day shift.

But she had worked the night shift.

“People on the day shift told them, ‘We don’t know her,’” Romby said. “It was just a bunch of B.S.”

When she returned, Romby was shifted to a new position. She continued to be badgered by supervisors, she said.

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In March 2019, she quit. “I felt like I was forced out,” she said.

Now Romby has a new job working as a welder and mechanic through the local boilermakers union, where, in contrast to Tesla’s nonunion workplace, if anyone harasses you, she said, “We notify our union reps, and it gets taken care of right away.”

In a statement, Tesla said that “Romby had multiple co-workers complain about her unprofessional and threatening conduct…. An investigation revealed she forcefully poked a co-worker in the face two times and threatened to ‘whoop his ass’ because she believed he was talking about her behind her back.”

After two written warnings, Tesla said, Romby complained “her supervisors were unprofessional toward her, but never stated that these supervisors used racial slurs or treated her differently because of race.”

Organ, Romby’s attorney, said she contests Tesla’s allegations, and did so in a March 2018 complaint “where she wrote that she ‘only stood up for herself to be left alone.’”

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“Despite its legal duty to produce employment records to Ms. Romby as required by the California Labor Code, Tesla has never provided her with any investigations into her complaints about inappropriate conduct at the factory,” Organ said.

‘That was salt in the wound’

Nigel Jones was 22 when he started working at Tesla’s Fremont automobile assembly plant in 2016. He’d just finished a three-year stint in the Army as a supply specialist, with a posting in South Korea.

His first job at Tesla was simple: keep tanks on forklifts filled with distilled water so they didn’t overheat. At first, he said, “I loved working there, I’m a people person, I love talking to people, and our job was essential because if the equipment goes down, the factory’s not running.”

He did pick up on some ominous overtones as he moved around the factory. He’d overhear white supervisors berate Black, Asian and Latino workers, often directing the N-word at Black employees. “Things like, ‘Tell that n— to get over here.”

When he asked fellow Black workers about it, they told him to think twice about complaining, because, he had been told, those who had taken similar complaints to human resources wound up out of a job.

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But he liked his boss at the time, the money was good and “I’ve always been the type who says, ‘Hmm, OK. That just happened. Let it go, keep the positive vibes.’”

Jones was promoted to fleet manager, in charge of keeping the factory’s forklifts and carts on schedule, maintained and repaired. He was originally hired as a contract worker, but then the company took him on as a full-time employee. He believed he was on his way up. “But when I became full time, things started going downhill very quickly.”

A man holds a skateboard in one hand and has his other arm on a woman's shoulders.

Nigel Jones worked for three years at the Tesla plant in Fremont. His mother, Rhonda Lockhart, right, said she had him get a lawyer when he told her about discrimination and harassment on the job.

(Paul Kuroda / For The Times)

He assumed he would “be going to the supervisor meetings and getting integrated” with other managers. “But I was young and Black and didn’t get invited to anything. I was outcasted from the get-go.”

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He had ideas for improving the fleet but said he was never taken seriously. “They didn’t like how much the company was spending on equipment, but they wouldn’t hear my suggestions on how to cut costs. I said if you people put more money into training people [to use the equipment properly] rather than buying new equipment, you could save a lot of money. Never once did that start to happen.”

Soon after his promotion, his new boss, a white man, started attending the meetings that Jones was excluded from.

His previous boss had been a good communicator, Jones said. But with the new boss, “we’d miss communications. He wouldn’t be telling me things I needed to know. It seemed like he was trying to make me look bad, like we weren’t doing anything.”

The man called him and two Black co-workers “monkeys,” he said. “Once, he walked away saying, ‘Oh you lazy n—.’ We looked at each other and said, ‘What?’”

That happened in December 2017, Jones said. A few weeks later, he told his mother, Rhonda Lockhart. Reached by phone, Lockhart said she recalled the conversation with her son, which she found troubling. “I had to explain to Nigel that for a manager to call you the N-word, that’s not normal.” She contacted a lawyer, and her son became part of the Department of Fair Employment and Housing lawsuit.

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The supervisor, who now works for another company, did not respond to emails and a phone call from The Times.

Though he feared he might be fired, Jones felt compelled to report the racism to human resources. His first meeting went well, he said. The woman assigned to his department, whom he identified as Tori Tanaka, “seemed to want to help.” (Tanaka, who no longer works at Tesla, could not be reached for comment.) But at the next meeting, there was a different woman who to Jones seemed less concerned. Called in a third time, he was fired.

“They didn’t tell me why, only that I wasn’t a good fit for Tesla, and later I found out it was for safety and attendance violations, which I never once had a write-up for.”

A colleague at a different Tesla facility offered to hire him there, but then told Jones he had been “blacklisted” from the company. “That was salt in the wound,” he said.

Tesla disputes that Jones was fired without warning, saying he “was reprimanded numerous times for documented attendance and safety violations” and for “walking off the job.”

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Asked to provide records of Jones’ violations or reprimands, Tesla did not respond.

The company said it has no record of “Jones making any race based complaint during his employment at Tesla.”

Jones said he was never reprimanded for any workplace issue.

He had testified under oath about the prevalence of the N-word at Tesla in two recent arbitration cases brought against the company by former employees. In one case, the arbitrator awarded a Black worker more than a million dollars.

Organ, his attorney, said Jones complained to HR about racism on Dec. 6, 2017. Shortly after that, Tesla “began looking for a reason to fire him.” Jones was terminated on Feb. 13, 2018.

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Jones now runs the skateboard company he founded, Spread the Shred. Sometimes he thinks about Musk, who once told employees who were targets of racism to get a “thick skin.”

“He has good ideas,” Jones said. But “if you don’t humble yourself a little bit, it will bring you down the wrong path. You might think you’re doing the right thing, but you’re not.”

Times researcher Scott Wilson contributed to this report.

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Facebook almost sold its tech portal to Amazon Alexa devices

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In November, Meta announced that it was discontinuing Portal, its standalone video chat machine. The decision came as Meta The first mass layoffs Amid falling stock prices and worries about its ambitions in Metaverse.

Over the years, BuzzFeed News’ coverage of Meta and Facebook has been unwavering strict and sometimes hostile. our reviews The portal also spoke the truth: this was a really great product. we lovable He. She. I lovable He. She. Rest in power, Portal – you’ve been a fine little device.

The portal was born in a cruel world. released in fall 2018, Cambridge Analytica The bogus scandal — about Facebook’s botched user data handling and (in hindsight) exaggerated claims about its impact on the 2016 election — was still fresh in the public’s mind. It was also still fresh in the minds of the tech press who would review the devices. For many, the idea of ​​letting the always-on camera-powered Facebook device into your home was akin to sending your Pornhub history directly to the Kremlin.

Despite this, the portal has been selling well, Meta’s chief technology officer Andrew Bosworth told BuzzFeed News in an interview. (Meta declined to divulge exact sales figures, but Bosworth estimated the number of units sold in “the millions”) More importantly, Bosworth added, “This was a product that the people who bought it loved.” And it appealed to a different demographic than most devices: It sold a lot more with women and people over 40.

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Ultimately, the decision to pull the plug came about because executives didn’t see a path to Gateway becoming a huge company (rather than just a good business), and with changing priorities at Meta, it didn’t work out. “We’re very sad about it,” Bosworth said. “You know the saying, ‘There is no priority unless it hurts’? It hurts.” (Not a complete loss though: Existing gateway devices will continue to function and receive support.)

Bosworth said that “the whole smart home category has been undermining expectations for a while now.” He added, “I think if you go back to where we expected the smart home as an industry to be when Portal entered the market versus where it is today, it wasn’t as successful as we expected it to be.”

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Another satire of metaverse from the world of tech alum? It contains an error

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reconsidering

Please report your error here

Written by Josh Riddell
Holt: 288 pages, $28

If you purchase books linked to from our site, The Times may earn a commission from Bookshop.orgwhose fees are supported by independent bookstores.

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Josh Riddle”Please report your error herein Silicon Valley in the early 2010s. As the author was a very early employee of Instagram and his first novel, which comes embellished with connotations of Literary Tech Skeptics, framed as a diary show, we’re ready for some satire that’s both risky and close to the bone. However, this is not quite the world we know.

Technology, for one thing, is more advanced. One of the app’s best features, explains Ethan, a modern art history specialist who works on a junior dating app called DateDate, is its “mood sensing technology” that uses “your phone’s camera, microphone, and accelerometer to understand your current mood.” After Every Bite” and panels respond to the viewer’s emotions – so when a bemused Ethan looks at one, it turns from “horizontal to psychedelic swirls”.

In a world unlike our own, one of the most effective ways a novel can clue the reader into its logistics is through the characters’ reactions. When narrator Ethan encounters these technological wonders, he doesn’t bat an eye. To lend to this alternate universe, the technology described is not particularly Jetsons-like – flying cars and robot maids are not. But when Ethan makes an accidental discovery while trying to clean up bugs in DateDate’s code, the established rules are broken, exposing (and possibly creating) a flaw in the tone of the novel that never resolves itself.

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Here’s what I mean: The discovery Ethan makes is that when a user on a dating app sees him as his perfect match, Ethan is briefly transported to a strange world vaguely referred to as “Other Worlds.” Standing “in a field, with tall, wet grass” under a sky “full of birds”, he hears the hum of nearby ocean waves before suddenly appearing in his office. His boss asks if he’s alright, and Ethan spouts a popular sci-fi story, pretending he’s alright because he can’t explain what just happened, and because, fittingly enough, when he tries to explain, he loses “all memory of what happened, from where you went “. Then he went back to work.

But that is not what drove me away; Rather, it was the strange things that felt strangely normal. DateDate, like a lot of startups, the enterprise gets, and like an apple A company with a well-developed campus and endless resources that turns out to be responsible for Ethan’s teleportation accident. As a way to test a new product called Gates, “a standalone app that takes you to different vacation destinations,” the company “pushed beta code to DateDate” before purchasing it. Ethan’s “other world” is a glitch that the company has not fully caught.

Release portals are much anticipated – beta testers included Johnny Depp and Beyoncé — and no one seems bothered by the invention of teleportation, not to mention that it’s much more Jetsonian than any other extrapolation in the book of current technology. It takes a while for the Department of Homeland Security to get through the gates, but even then it’s only because a small fraction of the flights may have been “undocumented.” Why isn’t any of this being treated as the massive, world-altering development?

This reaction is made even more confusing in light of the rest of the novel, which is firmly rooted in the real world. references for lyrics the NationalPaintings by Matisse and Miro, two books by Adrienne Rich and Sofia Coppola”lost in translation(Ethan stayed at the signature Tokyo hotel there) – All of this grounds Ethan’s narrative in a recognizable reality. It is difficult to reconcile this familiarity, bordering on banality, with technological magic realism.

If that sounds like nitpicking, that’s because it is. But in stories like this, the meticulous cultivation of an invented scientist requires precision and nuance, and on such a perilous path, a slight stumble can lead to a major meltdown. Creating a believable setting—especially a semi-realistic setting that is important to the story—is just as important (and challenging) to the success of the novel as creating compelling characters and interesting narratives.

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In fact, the teleportation items are “please report a bug here” problems. The plot mechanics, which include A.J Lisbeth Salander– A species named Numa searches for a young girl trapped in “other worlds”, extending Naivety in similar ways. How did the girl survive for years in this fleeting, ephemeral place that is alternately described, hazyly, as a void, a personal inventory of memories or another dimension? Like, what did you do He eats? And why don’t any of the characters—including the girl’s father—ask these questions, just to let the reader know that such things were considered?

A generous reader might be tempted to write off this as a by-product of satire, which stretches the rules of plausibility in a way that hard science fiction might not be. But then, the satirical elements just aren’t blunt enough to justify it. The establishment is like all the giant conglomerates that discredit contemporary fiction, from Dave Eggers”CircleTo Hooli from Silicon Valley toWall E“buy from large to large”severanceLomon Industries. The founder of DateDate is literally called the Founder (capital F), and that’s how everyone refers to it, but there’s a figure who’s only referred to as the Engineer (lowercase e) – a jab, no doubt, in the tech hierarchy, where it’s handled Upper class only as proper nouns. But he also reduces these characters to tropes.

Riedel aims to use these high-concept ideas to explore existential questions about identity, art, and technology, and there are moments when his talk on these topics is effective, even insightful. But novels are not unlike a complex piece of programming: a bewildering number of hidden components must work in unison to make seemingly simple functions possible, and as it first appears to Riddell, even small errors in the code can bring down an entire project.

Clark is the author of “Oasis of Horror in the Desert of Boredom” and “Skateboard”.

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Did celebrities learn their lesson from the FTX debacle?

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While roaming off the soccer field, Tom Brady makes his home for the FTX cryptocurrency trading platform.

“It’s better,” said the esteemed quarterback Says As he reviews an investment portfolio looking skyward on his phone. “I like better.”

The ad posted on FTX’s Instagram account in September, was not It’s the first time Brady has thrown his massive weight behind a tech company — but it was likely the last.

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After a month and a half, the balance sheet leaked From Alameda Research, a trading firm co-founded by former FTX CEO Sam Bankman-Fried, it led to a crash of epic proportions.

FTX is now based in the Bahamas bustyand Bankman-Fried sits in Palo Alto under house arrest As faces fraud charges. Some of the alien world’s closest associates turned against him; begged Not guilty.

If Brady hadn’t been completely caught up in the meltdown, he wouldn’t have come out completely unscathed, either. The professional athlete is among several celebrities being sued in a class action alleging they helped promote the sale of unregistered securities in the form of yielding FTX accounts.

The lawsuit, filed in Miami, highlighted the important role played by high-profile athletes, actors, and other entertainers in promoting FTX. Although some legal experts believe it will be difficult to prove liability, the federal case forces a reconsideration of how celebrities interact with the controversial cryptocurrency industry.

“It is clear that FTX’s paid validator program is designed to use the positive reputation associated with specific celebrities to convince consumers that FTX is a safe place to buy and sell cryptocurrency,” the lawsuit says. “Celebrities have a moral and legal obligation to know that what they are promoting is not likely to cause physical or financial harm to customers.”

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Ahead of its extraordinary implosion, FTX pulled together a red carpet of celebrity sponsors, bringing glamor and glamor to the ill-fated House of Cards.

Larry David starred In an FTX Super Bowl ad that positioned cryptocurrency as a world-historic innovation on par with the wheel or the flashlight.

Shaquille O’Neal Requested Potential investors: “I’m in. Are you?”

Other Familiar Names – Steve Curry, David Ortiz, Shuhei Ohtani, Naomi Osaka, Kevin “Mr. Brilliant” O’Leary – also promoted the company. All defendants are listed.

“It’s a warning to these celebrities,” said Adam Moskovitz, one of the attorneys filing the lawsuit. “If you are going to take a risk, there will be consequences.”

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An attorney representing Brady and David declined to comment. Representatives for O’Neal, Curry, Ortiz, Otani, Osaka and O’Leary did not respond to requests for comment. O’Neal has far himself from the company, framing his role as a “paid spokesperson”. O’Leary, known for his role as a celebrity investor on “Shark Tank,” told CNBC’s “Squawk Box” that Involvement With FTX it was the result of “groupthink”.

In addition to any permanent reputational damage, Brady and his ex-wife, model Gisele Bundchen, will likely be involved Lost Most or all of the significant financial stake they own in FTX.

The crypto space has always been awash with A-listers. Matt Damon, LeBron James, Reese Witherspoon, Snoop Dogg, Steve Aoki, and Steven Seagal have all promoted various crypto products. A year ago, Jimmy Fallon and Paris Hilton were in an awkward position shilling Non-fungible tokens, a specific class of cryptocurrency, on “The Tonight Show”. Cryptocurrency trading is unique prominently In a 2021 music video posted by Post Malone and The Weeknd.

And with celebrities comes celebrity scandals, especially in an industry as unregulated as cryptocurrency. The Securities and Exchange Commission charged Floyd Mayweather Jr. and DJ Khaled in 2018 with failing to disclose that they were paid to promote crypto tokens; Kim kardashian She met a similar fate in October. (At the time, Kardashian’s lawyers said the socialite fully cooperated and was pleased to solve this issue.)

FTX’s downfall has affected others in the entertainment industry, including former CAA agent Michael Kives, whose fund earned $300 million. investment From Bankman-Fried, according to the info. The former CEO reportedly wanted to sign A.J financing deal With the never-fulfilling power of Taylor Swift’s music.

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It’s no accident that Hollywood’s star power frequently overlaps with what is otherwise a fairly niche financial vehicle, experts say.

“Celebrity endorsements have been extremely important to cryptocurrency for a very long time,” said Yesha Yadav, associate dean at Vanderbilt Law School whose work focuses on securities regulation. The sector has “relied on celebrities to popularize it; on celebrities to use their existing social networks, credibility and reputation to drive an asset class that many people were unfamiliar with.”

“They’re really using celebrity as a tool to convince unsuspecting consumers to invest,” said Bonnie Batten, executive director of consumer watchdog group Truth in Advertising.

Moskovitz, the attorney behind the class action lawsuit, said he has been following cryptocurrency fraud cases for a while: first with low-level scammers, like a Kazakh teenager, and then around more formal crypto platforms over the past two years.

Now the lawyer wants to hold several of the celebrities he says have allowed Bankman-Fried to be held accountable. Pursuing celebrity sponsors provides a faster path toward recouping what FTX victims owe, Moskovitz told The Times, rather than trying to get money from an embattled Bankman-Fried and his fractured empire.

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“We have people who have lost millions of dollars … because they were told at 8% interest that this was the safest investment,” said Moskovitz, who claims some of his clients lost their savings after being persuaded by celebrity FTX sponsors. A safe place to park their money.

He added, “People respect celebrities.” “Right or wrong, people respect them, and you kind of get acceptance in the community” by enlisting them as sponsors.

was established In 2019 and worth $18 billion by 2021, FTX was a poster child for the cryptocurrency industry in part because Bankman-Fried proactively nurtured political connections, including via campaign Donations, and sought to create an aura of respectability that is lacking in most of the cryptocurrency industry – riddled with fraud and price swings. This summer, with the sector suffering, FTX made buyout and acquisition bids for other crypto companies, even when ordered by Federal Deposit Insurance Corp. Stop suggesting That cryptocurrency investments were backed by the government.

The company’s reputation really began to unravel in November with the leak of Alameda Research’s balance sheet, setting off a domino chain reaction that led to bankruptcy, house arrest, and Moskowitz’s class action lawsuit.

In addition to this case, the attorney is also pursuing a case in Florida State Court v. Brady, Ortiz, and O’Leary, which he hopes will lead to a ruling on whether interest-bearing FTX accounts constitute unregistered securities.

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For Moskowitz, this question is straightforward: “These are unregistered securities, you promoted them, and you are responsible.”

But others aren’t so sure.

“We don’t know if these things will eventually be considered securities,” said Sheila Warren, CEO of the Crypto Council for Innovation trade group. There is a strong argument that they are not at all like that and never have been; There is an argument that they start out as stocks. … All these arguments are there, and they are unresolved.”

“Our regulatory framework for the broader cryptocurrency market hasn’t really caught up,” said Yadav, associate dean for Vanderbilt Law. “When we talk about certain financial institutions like FTX that deal in tokens, because the tokens themselves don’t have any consensus about what they are legally, the institutions they deal with don’t either.”

Yadav added that it is unlikely that the court will issue a regulatory issuance for cryptocurrency on its own; What’s more conceivable is that some of the celebrities named in the lawsuit chose to settle the case to protect their reputations.

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Class action cases are hard to win, Truth in Advertising’s Patten said, and it won’t be easy to prove that the celebrity sponsors named in this case caused investors harm.

“I wouldn’t bet on the consumer side,” she said.

Regardless, the reputational damage from FTX’s implosion may be more daunting for celebrity affiliates than any dollar amount. Brady and the rest lent their prestige to Bankman-Fried when he was on top of the world; Now they are caught up in the fallout.

This could precipitate a long-term shift in how listeners interact with cryptocurrencies.

“I think we’ll see more caution in terms of assessing what might be reputational issues if you go into something that… I might not understand,” said Warren, CEO of the Crypto Council. “Maybe we should think about what it means to be involved in something so new.”

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Yadav predicted that the cryptocurrency industry may now turn to sources of validation for non-celebrities — such as legitimacy through regulation, for example.

“I think now celebrities don’t do that anymore,” she said. “Certainly not the big names.”



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