And it just got worse. Last week a consortium of 30 state attorneys general fined Cameo for not properly disclosing when celebrities were paid to endorse a certain product. However, Cameo’s financial situation meant it couldn’t afford to pay the $600,000 penalty levied by the suing states. Instead the company will have to pay only $100,000, according to the settlement agreement. 

During the settlement Cameo submitted audited financial documents from 2021 and 2022 that showed it couldn’t afford the payment. Cameo also provided more recent financial information from October 2023 that further proved it had fallen on hard times. 

Cameo’s bleak financial outlook spared it from having to pay the full penalty. However, if the company were to break the rules again it would be forced to pay the remaining $500,000, which “would presumably send the company into bankruptcy,” said Jennifer Arlen, director of a program on corporate compliance and enforcement at NYU Law. 

Under the terms, the states placed Cameo on a three-year probation period. A move like that by the attorney general is “absolutely” intentional and meant to stop repeat offenders, Arlen added. 

“If you have owners of a company that violate the law get caught, then willfully violate it again, then that’s a very strong signal that they’re simply not going to comply with the law,” Arlen said. “So you shouldn’t protect them from the consequences of that.”

Through a spokesperson Cameo said it had “cooperated with the investigation and remains committed to helping customers use our marketplace to source legally compliant endorsements from our roster of talent.”

When reached for comment a spokesperson for the New York Attorney General’s office pointed Fortune to a statement issued the day the settlement was announced. “For many New Yorkers, Cameo videos are fun to watch and share, but consumers deserve to know when they are watching a paid ad or a real review,” said New York Attorney General Letitia James. 

What happened to Cameo? 

Cameo’s harsh financial picture makes it the latest in a line of former unicorns to have hit hard times. In March 2021, Cameo was flying high, with a soaring valuation of $1 billion on the back of a $100 million Series C funding round. Major investors like SoftBank, Google Ventures, Kleiner Perkins, and even skateboarding legend Tony Hawk all lined up. 

Cameo pitched itself as an alternative to talent agencies and managers that could help celebrities connect with their fans directly, while cashing in on their fame. 

“We exist in an entirely different world today—one in which talent actually want to connect more deeply with their fans, and fans expect unprecedented access to the talent they admire most,” Cameo CEO Steven Galanis wrote in a blog post after the Series C round. “This funding will help us create the access and connections that will define the future of the ‘connection economy’ on a global scale.”

However, by March of this year Cameo’s Series D resulted in a cramdown round—a type of financing for troubled companies—that saw its valuation plummet 90%. Cameo managed to raise $28 million at a valuation under $100 million. 

The recent settlement stemmed from one of Cameo’s new ventures called Cameo Business that gave celebrities on the platform the chance to endorse products and business, not just send personal messages. Videos on this part of the platform failed to properly disclose that they were paid endorsements, according to the settlement agreement. The settlement accused Cameo of doing little to ensure that celebrities using the platform to promote certain products were following all the requisite rules, according to Randi Singer, a partner at law firm Sidley Austin’s commercial litigation practice. 

“It doesn’t appear that Cameo had any guidelines or guardrails in place with respect to endorsements,” she told Fortune in an email. “Brands’ requests were limited only by the terms of service and community guidelines and the celebrity’s own discretion.”    

Singer also notes that the celebrities themselves didn’t post the advertising content, they just made the videos for Cameo’s users. If they had posted it on their own social media profiles they may have been “more likely to be careful about disclosing any material connections or benefits,” she says.

As part of the agreement, Cameo will have to “clearly and conspicuously” label any endorsement videos as such and provide celebrity endorsers with terms of service that states they must follow all applicable laws to use the app. 

In its early days, investors were enamored with its easy-to-understand business model. Users would pay a fee to a celebrity in exchange for a video with a personalized message, and Cameo would take a 25% cut. For a while business seemed strong, especially during pandemic lockdowns when people were stuck at home. A birthday message from Bo Jackson went for a minimum of $450. A pep talk from Caitlyn Jenner cost $2,500 a pop. 

More than the big names, which did join at the outset, Cameo became known for having a plethora of barely famous actors, athletes, and reality TV stars. “My D-list celebrity might be your favorite person in the world,” Cameo’s Galanis told the Wall Street Journal in 2021 shortly after the startup raised $100 million. “We’re tapping into this. The definition of fame has totally changed.” 

People could get videos from various Real Housewives, cast members from The Office, and retired WWE stars. For a while those lesser names paid the bills for the company. But eventually Cameo struggled to recruit enough A-listers to satisfy its lofty valuation. The novelty wore off, and sales started to flatline. Investors soured on what appeared to be a passing fad. 

The state attorneys general, aware of Cameo’s precarious financial state, sought to protect themselves. Should the company go bankrupt it would have to pay the remaining $500,000 of its fine within 91 days.

Update, July 30, 2024: This article has been updated with a comment from Cameo.