The FTX collapse saga has turned a new page as a class-action lawsuit has been filed against Sam Bankman-Fried (SBF), the former CEO of the embattled crypto company. A class action is a lawsuit filed by an individual or a small group on behalf of a larger group.
The plaintiff Edwin Garrison, a resident of the State of Oklahoma, is suing for damages incurred from investing in FTX’s so-called “unregistered securities”. This legal action aims to hold all defendants liable for the billions of dollars lost by the plaintiff and all investors.
The court complaint which was filed with the United States District Court Southern District of Florida Miami Division states: “The Deceptive and failed FTX Platform was based upon false representations and deceptive conduct. Although many incriminating FTX emails and texts have already been destroyed, we located them and they evidence how FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors from across the country, who utilize mobile apps to make their investments. As a result, American consumers collectively sustained over $11 billion (dollars) in damages”
The complaint also compared FTX’s operation to a Ponzi scheme as presented in the lawsuit, “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 (Yield Bearing Account) and loans to pay interest to the old ones and to attempt to maintain the appearance of liquidity”
Aside from FTX, the lawsuit also named several celebrities and athletes:
- NFL athletes Tom Brady and William Trevor Lawrence
- Fashion Model Gisele Bündchen
- Basketball Stars Shaquille O’Neal, Udonis Haslem, and Stephen Curry
- Baseball Athletes David Ortiz and Shohei Ohtani
- Professional Tennis Player Naomi Osaka
- Celebrity Lawrence Gene David
- Businessman and Shark Tank Star Kevin O’Leary AKA Mr. Wonderful
The court document elaborates how each of the accused celebrity endorsers helped promote FTX to their fans. It further quoted former FTX.US President Brett Harrison when he said that they were the newcomer to the scene and they needed some kind of mass branding and advertising.
An advertisement starred by FTX ambassadors Tom Brady and Gisele Bündchen was also presented in the court document. The ad campaign showed how they were able to convince their friends and acquaintances to get into FTX.
The complainant is pointing out that celebrity endorsers and influencers played a big role in convincing people to put their money in FTX. Page 20 of the court document stated, “A number of them hyped FTX to their social media fans, driving retail consumer adoption of the Deceptive FTX Platform.”
The court document also presented several pieces of evidence, including tweets from SBF when he apologized for the implosion of his crypto company, FTX. SBF has deleted some of his tweets in an apparent attempt not to incriminate himself.
The outcome of this legal proceeding will dictate the direction on how investors and crypto companies should act in the future. Nobody can argue that FTX executives should answer to its investors. Apologies should be given, but making customers’ funds whole should be a priority.
Aside from FTX’s Top executive, several of its celebrity endorsers were also included in the case. Any company that wants to entice customers will probably spend a lot of resources on advertisement and one of the best ways to do it is to tap celebrity influencers. Were they just doing their job or should they be held accountable for influencing people to invest? This is for the court to decide.
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