In January, Khaby Lame was on top of the world. The biggest creator on TikTok, with more than 160 million followers, had just signed a deal with the Hong Kong-based printing firm Rich Sparkle Holdings reportedly worth $975 million — the ideal illustration of how far the creator economy has come.
Just three months later, it’s unclear if that deal is happening at all. The Senegalese-Italian Lame, best known for his Charlie Chaplin-esque silent comedy shorts, now largely disavows the investment company on his social media accounts amid a massive slide in Rich Sparkle’s share price.
Initially, the Lame deal had all the makings of a dream success story: the world’s most popular TikToker signs a deal with an under-the-radar company to license the rights to his AI-generated digital twin for nearly $1 billion. But, as experts told TheWrap, this is turning out to be a nightmare scenario for Lame, who may have been unintentionally dragged into a financial racket.
“I think this whole thing is a scam, to be honest,” Henry Carter, managing partner at Jamestown Capital, told TheWrap. Carter deals with companies like Rich Sparkle Holdings “all day, every day,” companies that have roughly $6 million in revenue.
The situation is a sobering reminder to be wary when it comes to creators and big numbers. While an increasing number of popular YouTubers and TikTokers have struck deals for equity stakes in companies, the field is also rampant with influencers caught up in scams (think Hailey Welch, the “Hawk Tuah Girl,” and her $HAWK cryptocurrency).
In the days after the deal’s announcement, Rich Sparkle’s stock hit $150 a share, giving it a market cap of $1.8 billion. As of Tuesday, it’s worth $124 million, closing at $8.52.
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“The Khaby Lame/Rich Sparkle deal is a textbook cautionary tale — a $975 million headline that has since collapsed 90%, with major brokerages restricting trading and no clear confirmation the deal even officially closed,” added Alicia Weaver, vice president of media activation at media agency Mediassociates. “The mechanics map directly to a classic pump-and-dump.”
Under the original deal, Rich Sparkle would exclusively have access to the comedy creator’s AI digital twin for 36 months, using the avatar on live streams and to sell products on TikTok Shop, just to name a couple of planned usages. The commercialization of Lame’s likeness was predicted to be worth $4 billion in potential sales.
Now, it seems as if this deal has stalled if not fallen apart. Since announcing its merger with Lame’s Step Distinctive Limited, Rich Sparkle’s stock has plummeted by more than 90%. Though Rich Sparkle indicated that the deal had been “completed” in its January press release, no filings have confirmed that’s the case. In fact, a SEC filing from late March noted that the closing of the deal is contingent on certain conditions being met.
Ig:@khaby00
The love affair seems to have cooled on Lame’s side as well. The creator removed Rich Sparkle’s stock ticker (ANPA) from both his Instagram and TikTok bios. Similarly, no filings have indicated that Lame’s company ever received the 75 million shares that the Rich Sparkle deal promised.
Adding to the smoke, stock trading institutions like ETrade, Merrill Lynch, Fidelity, Charles Schwab and Vanguard have all either blocked online trading of Rich Sparkle stock or put restrictions on it. Interactive Brokers listed the stock as non-tradable.
Whether or not the deal actually goes through, it’s also a test for a major economy that’s still fairly young. Last March, MrBeast’s Beast Industries was valued at $5 billion. Can other creators reach those massive valuations without investing in as many businesses as Jimmy Donaldson has? It’s also a deal that questions the value of all-stock offers and AI digital twins, a growing trend where AI avatars of celebrities are created and used for various purposes.
“Making a $975 million equity-based bet on a very unproven technology, both technically and commercially, that feels problematic to me,” Scott Sutton, CEO of the social and influencer marketing company Later, told TheWrap. “The creator economy is well understood. I would encourage creators to invest in established business models that help them promote their earning capability while creating healthy businesses.”
Representatives for Rich Sparkle Holdings and Lame did not respond to TheWrap’s request for comment.
A shocking deal
When Edward Klaris, the managing partner at Klaris Law and CEO of KlarisIP, first heard of the deal between Lame and Rich Sparkle Holdings, he was surprised. Part of that shock came from the fact that, because it was all-stock, there was no guarantee Lame would be paid. But most of it came from Rich Sparkle Holdings itself.
Though Rich Sparkle is based in Hong Kong, it’s registered in the British Virgin Islands. Prior to partnering with Lame, the company has no evidence of partnering with creators in any meaningful way, which is unusual in the creator economy. Typically, businesses make several smaller deals with creators to test out their social strategies before cementing major partnerships.
“From day one, I was like, ‘What is this company?’ It just didn’t have any real earnings, and I couldn’t tell what it really did. And I was surprised by how the deal wasn’t strategic,” Klaris said. “It wasn’t a place that has historically done deals with creators and made them successful.”
Klaris wasn’t the only one who was skeptical. “I think, in the end, this is pump and dump. But I think there’s actually a deeper story here,” Carter said. “How did this thing even get on a stock exchange in the first place?”
Aside from Rich Sparkle Holdings’ very existence, Lame’s valuation has left many perplexed. The potential revenue from sales from Lame’s AI digital twin were estimated to be $4 billion — $1 billion less than the valuation of Beast Industries. And that corporation includes MrBeast’s YouTube earnings, a thriving chocolate company, licensing deals for “Beast Games,” a toy line, the clipping company Vyro, a banking service and several other ventures.
Sutton noted that the $4 billion prediction is devoid of “tangible existing revenue streams.”
Klaris was more blunt.
“It seems like a number out of the blue,” he said.
Over the last several months, Rich Sparkle Holdings shares have been in free fall. An SEC filing from March 31 noted that the deal has not been completed and that its completion is dependent on a due diligence investigation and approval from the stock exchange.
Though Weaver likened the deal to a pump-and-dump scheme — a scam that involves perpetrators artificially inflating the price of a low stock through misleading statements only to sell it at a higher price — she doubted whether Lame was a knowing participant.
Matt Grandchamp, senior vice president and head of revenue for NowThis, also doubted Lame had any knowledge of any ulterior motives. While working for Group Black, Grandchamp worked with Lame on the show “Khaby Is Coming to America” and praised the creator as a good businessman as well as a creator who seemed to really care about his audience.
“This deal is kind of indicative of the creator economy and how the folks who are representing creators can sometimes not be experts in the field that they’re actually doing deals in,” Klaris said. “I don’t know what questions really were asked, but this [deal] seems surprising.”
@khaby.lame Let’s just use regular belt from now on
#learnfromkhaby #comedy ♬ original sound – Khabane lame
The growing use of AI digital twins
The deal also made headlines for its intent to create a digital double of Lame. AI avatars for celebrities have been around for a while. Paris Hilton unveiled her digital twin in 2024, and last year IShowSpeed used an AI avatar chatbot so that he could keep interacting with his audience during one of his 24/7 livestreams. It’s an emerging business among some of the biggest creators, but it’s also one that’s largely been unproven.
“The biggest knock [for this deal] is actually more aimed at AI and the premise that you’re going to earn $4 billion in revenue off of the digital likeness. There are other examples where we’re not sure if the market’s ready for AI digital twins,” Sutton said, pointing to the Coca-Cola AI-generated ad that led to mass outrage.
It’s also unknown how much these avatars should be worth. When it comes to something like music licensing, people generally know how much Justin Bieber’s library is worth. But the technology around AI avatars is so new, consumer demand is unclear. Sutton likened the valuations around AI digital twins to the market around the NFT craze, which placed sky-high prices on digital drawings.
“I don’t expect [AI digital twins], in the short term, to replace or substantially improve upon the offerings that that currently exists. And by that, I mean the live streamers themselves and the personalities who are creating that content on a daily basis,” Justin Miclat, CEO of the livestreaming and gaming talent management firm The Kinetic Group, told TheWrap. “Behind the scenes, in terms of the workflow, AI and those emerging technologies have helped create efficiencies. But the actual product itself doesn’t necessarily replace anything that currently exists in the marketplace.”
“When you’re looking at creating digital twins and other kinds of IP expansions — and by IP, I mean also voice and likeness — creators need to look at what sort of revenue models they want to have,” Klaris said. “You need to look at guaranteed minimum royalties and some guaranteed payments just to make sure that being in this game is worth it to you, especially when you’ve got the kind of leverage that Khaby Lame has.”
@khaby.lame Today is my birthday, but I can’t get inside. Thank you for all the messages
#comedy #learnfromkhaby ♬ original sound – Khabane lame
Even if the worst happens and the deal doesn’t go through, it’s unlikely to scare people away from partnering with creators.
“[If the deal fails], what it may do is solidify the known and existing pathways for creator monetization and business building that are more proven, more healthy and more well understood,” Sutton said. “I’m all for innovation, but in this case, I’m more supportive of brands and creators that are creating really healthy business models founded in reality and real existing revenue.”
“I hope what it does is it incentivizes creators who will have ambitions that they need to spend to get good representation, whether it’s a manager, an agent, a lawyer — people who are going to help them legitimately kick the tires when they’re in the big leagues,” Klaris said.
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