Sam Bankman-Fried of FTX, Some Celebrity Developers Sued by Crypto Investors
US crypto investors have sued FTX founder Sam Bankman-Fried and several celebrities who promote his exchange, including NFL quarterback Tom Brady and comedian Larry David, alleging they engaged in deceptive account-selling practices digital that produces the FTX crop.
The proposed class action filed Tuesday night in Miami alleges that the FTX generating accounts were unregistered securities that were illegally traded in the United States.
FTX has filed for bankruptcy and is facing scrutiny by US authorities amid reports that $10 billion (roughly Rs. 81,500 crore) in client assets were moved from FTX to Bankman-Fried’s trading firm Alameda Research.
At least $1 billion in customer money is missing, sources told Reuters.
When crypto exchanges tanked on liquidity concerns, US investors sustained $11 billion (roughly Rs. 8,140 crore) in damages, the lawsuit said.
The lawsuit seeks damages from Bankman-Fried and 11 athletes and other celebrities who promoted FTX, including David, the creator of “Seinfeld” and “Curb Your Enthusiasm.”
David starred in an FTX commercial that aired during the 2022 Super Bowl featuring fictional characters dropping key innovations throughout history and ending with the message “Don’t miss out on Crypto.”
Brady, tennis star Naomi Osaka and professional basketball team Golden State Warriors are also accused in the case.
Representatives for Bankman-Fried, Brady, Osaka, David and the Golden State Warriors did not immediately respond to requests for comment Wednesday.
John J Ray III, FTX’s new chief executive who was not named as a defendant in the suit, declined to comment on the allegations.
The lawsuit was brought on behalf of Edwin Garrison, an Oklahoma resident who had an FTX yield-generating account that he funded with crypto assets to earn interest, and others like him.
Garrison alleges that while FTX lured American investors to its lucrative accounts, it was a “Ponzi scheme” where investors’ money was funneled to related companies to maintain financial transparency.
Investors and the US Securities and Exchange Commission have previously gone after celebrities for deceptively lying.
Reality TV star Kim Kardashian agreed in February to pay the SEC $1.26 million (about Rs. 10 crore) to settle claims that she failed to disclose that she was paid to promote EthereumMax tokens. He did not admit to wrongdoing.
Private investors have also sued Kardashian and others for their roles in promoting the tokens.
Garrison cited these cases in his lawsuit, as well as a February ruling by the 11th US Circuit Court of Appeals that allowed BitConnect cryptocurrency investors to sue people who promoted the coin online.
His lawsuit alleges that promoters of Bankman-Fried and FTX conspired to defraud investors and violated Florida state laws that require securities to be registered and prohibit unfair business practices.
Sean Masson, a Scott+Scott attorney representing crypto investors in the EMAX case, said investors used Florida’s unfair trading law to target crypto promoters in pending lawsuits.
“For them to be successful, they would need to commit an act of deception or malpractice, and that it caused real harm,” Masson said.
© Thomson Reuters 2022