US sports stars named in FTX deceptive practices lawsuit

Top US sports stars and personalities have been named in a deceptive practices lawsuit targeting investors who fell victim to the stunning collapse of cryptocurrency exchange FTX.

The celebrities helped promote the exchange, which declared bankruptcy in the United States last week in a meltdown that rippled through the digital currency landscape and drew the attention of authorities in several countries.

On Wednesday, Treasury Secretary Janet Yellen was the latest official to call for greater scrutiny of the crypto industry.

American football star Tom Brady and his model ex-wife Gisele Bundchen, retired basketball great Shaquille O’Neal, Grand Slam tennis champion Naomi Osaka, actor/comedian Larry David and Shark investor Tank Kevin O’Leary were among those named alongside FTX founder Sam Bankman-Fried in the lawsuit filed Tuesday in federal court in Miami.

Investor Edwin Garrison of Oklahoma filed suit in Miami court on behalf of other investors, seeking damages for losses suffered during the FTX implosion, accusing the company of “false statements and omissions”.

“FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors across the country,” the lawsuit alleges.

“Some of the biggest names in sports and entertainment have either invested in FTX or served as brand ambassadors for the company” and promoted the exchange in advertisements and on social media, the document states.

David appeared in a television commercial during this year’s American football Super Bowl championship game, a coveted and expensive promotional spot.

The exchange “needed celebrities … to continue funneling investors into the FTX Ponzi scheme, and to promote and substantially assist in the sale of ‘accounts’ that are unregistered securities,” according to court documents.

– ‘regulatory loopholes’ –

The turmoil at FTX, which until recently was valued at $32 billion, came after Binance, the world’s largest cryptocurrency platform, backed out of a takeover deal amid reports about mismanagement of customer funds and potential investigations by regulators.

“The recent failure of a major cryptocurrency exchange and the resulting unfortunate impact on holders and investors of crypto assets demonstrates the need for more effective oversight of the cryptocurrency markets,” Treasury’s Yellen said in a statement.

The U.S. agencies pointed to the risks in the crypto industry, which could eventually spill over to the traditional financial system, and she called on Congress “to act quickly to close the regulatory gaps identified by the Biden administration.”

Meanwhile, the House Financial Services Committee announced Wednesday that it would hold a hearing next month to investigate the company’s collapse.

“The downfall of FTX caused massive harm to over a million users, many of whom were everyday people who invested their hard-earned life savings in the FTX cryptocurrency exchange, only to see it all disappear in a matter of seconds. seconds,” said Maxine, chair of the committee. Waters said in a statement.

“Unfortunately, this event is just one of many examples of cryptocurrency platforms crashing in the past year.”

The lawsuit alleges that the company used money from new investors to “pay interest to old ones and attempt to maintain the appearance of cash.”

The collapse came amid growing doubts over FTX’s financial stability. Attention had focused on the relationship between the exchange and Alameda Research, a trading house also owned by Bankman-Fried, and reports that it withdrew funds from the exchange, even as it tried to fill a void of 7 billion dollars.

It was a dramatic reversal of fortune for founder and former cryptocurrency prodigy Bankman-Fried.

The disgraced executive apologized on Twitter and resigned, but after the company filed for bankruptcy he said he was the victim of “unauthorized dealings”.


Comments are closed.