Celebrities in firing line as FTX’s collapse prompts high-profile class action lawsuits

Before the fourth instalment of the epic seven-game Eastern Conference finals between the Boston Celtics and the Miami Heat, the Inside the NBA television crew interviewed Steph Curry about being named the league’s 2023 Kareem Abdul-Jabbar Social Justice Champion.

Shaquille O’Neal launched into a paean, referencing Curry’s class and describing him as his favourite player. Then he joked, “Congratulations, my brother, and thanks for getting me into trouble,” a knowing quip referring to the fact both men are embroiled in the same cryptocurrency scandal.

If the joshing bothered Americans who lost a collective $11bn in the collapse of FTX last November, those offended didn’t have to wait long for revenge. Later that evening, a representative from Moskovitz Law sidled up to O’Neal during the game and served him process papers in the class action lawsuit relating to the controversial crypto outfit going bust last November.

The incident made national news because lawyers had spent $100,000 and several months trying and failing to serve the somehow elusive 7ft 1in NBA icon, even hurling the papers at his car, and trying to deliver them via social media.

In another ironic twist, O’Neal was working that night at the Kaseya Center, a venue previously known as FTX Arena, the company’s founder Sam Bankman-Fried having once promised the Heat $135m for naming rights across nearly two decades.

I was the sort of eye-popping contract that illustrated the ambition and scope of the ill-fated company during its very brief prime. Equally telling is the calibre of individuals named alongside O’Neal and Curry in the suit.

These include legendary quarterback Tom Brady, supermodel Gisele Bundchen, former four-time Grand Slam winner Naomi Osaka, Jacksonville Jaguars’ quarterback Trevor Lawrence, and the Los Angeles Angels’ Shohei Ohtani.

All either promoted FTX without disclosing they were being paid to do so or starred in commercials for the company.

“Part of the scheme employed by the FTX Entities involved utilising some of the biggest names in sports and entertainment – like these defendants – to raise funds and drive American consumers to invest in the Yield Bearing Accounts,” charges the lawsuit filed in Florida.

“FTX entities needed celebrities like the defendants to continue funnelling investors into the FTX Ponzi scheme.”

Describing it as a Ponzi scheme is important. It’s alleged that athletes endorsing the company must have known they were participating in a fraudulent enterprise because the numbers involved were so gaudy.

FTX was worth $32bn at one point in its 3½-year history, spent $350m on relationships with sports teams and athletes, and splurged $7m alone on one television ad featuring Larry David, creator of Seinfeld and Curb Your Enthusiasm, that ran during last year’s Super Bowl.

FTX had a policy of recruiting recognisable high net worth individuals like David, somebody with a personal fortune of $500m, to convince sceptical and gullible punters this cryptocurrency was a mainstream investment opportunity.

With umpires in Major League Baseball wearing the company logo on their uniforms, the Golden State Warriors (also being sued) emblazoning it on their home court, and a seven-time Super Bowl winner talking it up in commercials, everything was about making it appear legit rather than the cyber world’s own 21st century Gold Rush.

“It’s an incredibly exciting time in the crypto-world and Sam and the revolutionary FTX team continue to open my eyes to the endless possibilities,” said Tom Brady at the height of the madness.

“This particular opportunity showed us the importance of educating people about the power of crypto while simultaneously giving back to our communities and planet. We have the chance to create something really special here, and I can’t wait to see what we’re able to do together.”

Brady and Bundchen may have lost a combined $90m in FTX although nobody knows how many of those shares they purchased with their own money or received in return for their endorsement.

Their lawyers have asked for the case to be dismissed as “without merit”, calling the whole business “frivolous”.

Other defendants have taken a different tack. Ohtani, arguably the best player in baseball, has tried to get himself removed from the case in Florida on the grounds that he can’t speak English and was only hired by the company to promote its products in his native Japan.

The case raises interesting legal questions. Should the endorsers have done more due diligence before putting their names to such an obviously risky enterprise and, by failing to do so, are they now liable to pay compensation to those who lost money? Does every athlete and celebrity in America have to be more cautious now about any product they choose to promote.

Of those FTX threw easy money at, all-conquering Taylor Swift appears to be the only person who questioned whether she should be flogging unregistered securities and duly turned down $100m.

Attaching famous names to a class-action lawsuit is a tactic often used to draw media attention and just about every news story here revisits the ads these people did, mortifying commercials now cited as evidence they were preying on “unsophisticated investors” by promising the ultimate 21st century get-rich-quick opportunity.

Larry David’s outing at the Super Bowl doesn’t quite fit the bill as the advertisement script ends with him ridiculing FTX’s claims to be “the safe and easy way” to get into crypto.

“Eh, I don’t think so,” he says. “And I’m never wrong about this stuff – never!”

True words spoken in jest. Etc.

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