On November 15, a consortium of investors filed a class-action lawsuit in the Southern District of Florida against the founder of FTX, Sam Bankman-Fried, along with several high-profile athletes and Hollywood celebrities, including seven-time Super Bowl champion Tom Brady, NBA superstar Stephen Curry, NBA legend Shaquille O’Neal, tennis star Naomi Osaka, and “Seinfeld” creator Larry David.
Each of the high-profile Hollywood and sports celebrities included in the lawsuit have appeared in commercials promoting FTX – the third-largest cryptocurrency exchange in the world. Curry joined Brady at FTX as a shareholder and ambassador in September 2021 as his first cryptocurrency venture. Curry shared in a press statement at the time: “I’m excited to partner with a company that demystifies the crypto space and eliminates the intimidation factor for first-time users. FTX is like-minded when it comes to giving back to the community in meaningful ways and I can’t wait to see what we can achieve together.” Meanwhile, Osaka became an ambassador in March 2022 to help bring more women into Web3 – an idea for a new iteration of the World Wide Web, which incorporates concepts such as decentralization, blockchain technologies, and token-based economics.
Last week, Bankman-Fried resigned as CEO and FTX filed for bankruptcy protection after reporting billions of dollars in losses. News of FTX’s bankruptcy proceeding quickly led to the demise of several of the company’s sports-related deals. The Miami Heat and Miami-Dade County ended its 19-year, $135 million naming rights deal secured in March 2021. FTX had paid Miami-Dade County $20 million to date, and its contract with the Heat and the County requires FTX to pay $16.5 million if it faces an “insolvency event.” Additionally, the Mercedes-AMG Petronas Formula 1 team suspended its deal with FTX, and esports organization TSM — the most valuable esports company in 2022 with a valuation of $540 million — also decided to suspend its 10-year, $210 million naming rights deal with FTX.
The lawsuit claims that the defendants “made numerous misrepresentations” about FTX, and that the defendants’ endorsements of FTX were part of a “fraudulent scheme designed to take advantage of unsophisticated investors from across the country, who utilize mobile apps to make their investments.” The lawsuit alleges that the athletes’ and celebrities’ statuses brought instant credibility to FTX and should be held just as culpable as Bankman-Fried for promoting FTX’s failed business model. “Part 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 … pouring billions of dollars into the deceptive FTX platform to keep the whole scheme afloat,” said the lawsuit. As a result, the lawsuit claims US consumers collectively sustained more than $11 billion in damages.