The two sports legends and the businessman are defendants in a lawsuit against the FTX cryptocurrency exchange.
The FTX debacle is rocking the worlds of sports, business and entertainment.
The cryptocurrency exchange, which filed for Chapter 11 bankruptcy on November 11, was a platform with many star ambassadors.
Some of them, like NFL star Tom Brady, his ex-wife supermodel Gisele Bundchen, NBA stars Stephen Curry and Shaquille O’Neal, businessman Kevin O’Leary, aka “Mr Wonderful,” endorsed the firm founded by Sam Bankman-Fried.
Brady and Bundchen starred in FTX ads, promoting cryptocurrencies.
But the sudden collapse of the platform risks engulfing the savings of hundreds of thousands of retail and institutional investors. While Bankman-Fried has apologized and regulators have opened investigations, a class action lawsuit has just been filed against “all parties who either controlled, promoted, assisted in, and actively participated in FTX Trading.”
The lawsuit, which was filed in Florida, names Bankman-Fried, Brady, Bundchen, Curry, O’Neal, Udonis Haslem, David Ortiz, Trevor Lawrence, baseball star Shohei Ohtani, tennis star Naomi Osaka, “Seinfeld” creator Larry David and O’Leary.
“The FTX entities imploded, their over $30 billion in value evaporated almost overnight, and the FTX entities found themselves filing their own emergency Chapter 11 bankruptcy petition in Delaware,” the lawsuit said.
‘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.”
The plaintiffs added that “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 in the YBAs, 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 FTX platform to keep the whole scheme afloat.”
TheStreet could not reach the defendants’ lawyers.
The insolvency of FTX, which filed for Chapter 11 bankruptcy on November 11, was due to a liquidity shortfall when clients attempted to withdraw funds from the platform a few days ago. The liquidity shortfall appears to have been the result of FTX’s founder reportedly transferring $10 billion of customer funds from FTX to his cryptocurrency trading platform Alameda Research, according to Reuters, citing two sources that “held senior FTX positions until this week”.
FTX faces a shortfall of $1.7 billion, one source told Reuters, while the other source said that between $1 billion and $2 billion were missing.
FTX’s financials also showed that there was a “back door” in the books, created with “bespoke software,” according to the news outlet. It was described as a way that Bankman-Fried could alter the firm’s financial records without raising any alerts.
‘Geniuses’
But Bankman-Fried denied the existence of a “back door.”
Bankman-Fried, who resigned as CEO on November 12, was once hailed as the savior of the sector during the liquidity crisis of last summer.
The complaint against FTX and the celebrities who endorsed the platform was filed by eminent lawyers Adam Moskowitz and David Boies on behalf of Edwin Garrison, an FTX customer.
“It is still very difficult to comprehend that just one company defrauded more than $11 billion dollars from consumers, all from our backyard here in Miami,” said Moskowitz who is also representing a nationwide class action against billionaire Mark Cuban and Stephen Ehrlich, founder, and CEO of fallen crypto lender Voyager Digital.
“FTX were geniuses at public relations and marketing, and knew that such a massive Ponzi scheme larger than the Madoff scheme, could only be successful with the help and promotion of the most famous, respected, and beloved celebrities and influencers in the world.”
