A class action lawsuit launched against FTX’s former chief executive Sam Bankman-Fried over the cryptocurrency exchange’s almost unbelievable collapse, names several celebrities as defendants. According to class action attorney Adam Moskowitz, who filed the lawsuit in Florida this week, the named celebrities are culpable for promoting the now-stricken company. FTX filed for bankruptcy amidst its collapse, despite boasting a $32 billion valuation only a couple of weeks ago.
Almost every cryptocurrency was affected by the FTX crash, with Bitcoin suffering its worst week in two years, falling from $20,905 to $15,784 in the five days after FTX failed. Such a massive drop in value has far-reaching effects worldwide because Bitcoin is the most popular and mainstream cryptocurrency on the planet. Tens of thousands of minor and major investors, financial institutions, and those playing at the biggest and best Bitcoin betting sites saw almost a quarter of their Bitcoin’s value wiped out in less than a week.
Which Stars Are Named in the FTX Lawsuit?
The list of celebrity defendants reads like a who’s who of the sporting world. Japanese tennis star Naomi Osaka, Udonis Haslem, and Steph Curry from the Golden State Warriors of the NBA, elite-level baseball players Shohei Ohtani and David Ortiz, and NFL legend Tom Brady and his wife Gisele Bundchen potentially find themselves in hot water for endorsing FTX. All the stars named have distanced themselves from the company and have declined to comment to the media, with Brady deleting several tweets about his involvement with FTX.
Furthermore, the NBA franchise Miami Heat has stated it is pulling out of its deal with FTX. The Heat’s stadium is named the FTX Arena. Mercedes’ Formula 1 team, whose cars displayed the FTX logo, suspended its agreement with the bankrupt company before the recent Brazilian Grand Prix.
Some of the lawsuit’s wording is quite damning of FTX and its celebrity endorsers, with the court papers going as far as declaring FTX as a Ponzi scheme.
“The Deceptive FTX Platform maintained by the FTX Entities was truly a house of cards, a Ponzi scheme where the FTX Entities shuffled customer funds between their opaque affiliated entities, using new investor funds obtained through investments in the YBAs and loans to pay interest to the old ones and to attempt to maintain the appearance of liquidity.
“Part of the scheme employed by the FTX Entities involved utilizing some of the biggest names in sports and entertainment to raise funds and drive American consumers to invest in the yield-bearing accounts, which were offered and sold largely from the FTX Entities’ domestic base of operations here in Miami, Florida, pouring billions of dollars into the Deceptive FXT Platform to keep the whole scheme afloat.”
It is not only the celebrities mentioned above that are named in the lawsuit because former NBA star Shaquille O’Neal is there, as is Seinfeld creator Larry David, who appeared in a series of television commercials in which his fictional character promoted FTX, is also named on the court documents.
Can FTX Be Resurrected?
John J. Ray III is the new CEO of FTX after Bankman-Fried resigned from the role. Ray previously supervised the Enron financial scandal and unleashed a scathing attack on Bankman-Fried and his senior management team.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentrations of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented.”
Ray has the unenviable task of trying to salvage something from the complex mess of dozens of companies that seemingly did not operate as a company should. Whether he achieves his goals remains to be seen, but one thing is certain: Bankman-Fried will never again be involved in cryptocurrency.