No surprises here, but a proposed class action has just been filed over the spectacular collapse of crypto exchange FTX. The suit does not name FTX as a defendant, thus sidestepping the bankruptcy proceedings for the company, but instead focuses on its founder, Sam Bankman-Fried, and all the celebrities who allegedly promoted FTX to investors.
The Complaint alleges that FTX was “a Ponzi scheme where the FTX Entities shuffled customer funds between their opaque affiliated entities, using new investor funds obtained through investments in the [Yield Bearing Accounts] and loans to pay interest to the old ones and to attempt to maintain the appearance of liquidity.” Regarding the celebs, it adds that “[p]art of the scheme employed by the FTX Entities involved utilizing some of the biggest names in sports and entertainment—like these Defendants—to raise funds and drive American consumers to invest in the YBAs.” The specific wrongdoing alleged is that “although [the celebrity] Defendants disclosed their partnerships with the FTX Entities, they have never disclosed the nature, scope, and amount of compensation they personally received in exchange for the promotion of the Deceptive FTX Platform, which the SEC has explained that a failure to disclose this information would be a violation of the anti-touting provisions of the federal securities laws. Moreover, none of these defendants performed any due diligence prior to marketing these FTX products to the public.” The Complaint lists actions by regulators against Floyd Mayweather, Kim Kardashian and basketball player Paul Pierce for allegedly similar conduct.
The suit names as defendants the celebrities Tom Brady, Gisele Bundchen, Stephen Curry, Golden State Warriors, Shaquille O’Neal, Udonis Haslem, David Ortiz, William Trevor Lawrence, Shohei Ohtani, Naomi Osaka, Lawrence Gene David, and Kevin O’Leary.