US sports stars named in lawsuit over FTX's deceptive practices

US sports stars named in lawsuit over FTX's deceptive practices

Failed cryptocurrency exchange FTX used celebrities to promote its 'Ponzi scheme,' according a lawsuit file in US court
Failed cryptocurrency exchange FTX used celebrities to promote its 'Ponzi scheme,' according a lawsuit file in US court. Photo: Stefani Reynolds / AFP/File
Source: AFP

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High-profile US sports stars and personalities have been named in a lawsuit over deceptive practices targeting investors who became victims of 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 has reverberated across the digital currency landscape and drawn scrutiny from authorities in multiple countries.

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

Plaintiff Edwin Garrison filed the suit in a Miami court on behalf of other investors, seeking to recover damages from losses suffered in the FTX implosion, accusing the company of "misrepresentations and omissions."

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"FTX's fraudulent scheme was designed to take advantage of unsophisticated investors from across the country," the lawsuit alleges.

"Some of the biggest names in sports and entertainment have either invested in FTX or been brand ambassadors for the company" and hyped the exchange on social media, the document said.

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David appeared in a television ad during this year's American football Super Bowl championship game, a coveted and costly promotional spot.

FTX "needed celebrities ... to continue funneling investors into the FTX Ponzi scheme, and to promote and substantially assist in the sale" of the accounts "which are unregistered securities," the court documents said.

The turmoil at FTX, recently valued at $32 billion, came after Binance, the world's biggest cryptocurrency platform, backed out of a deal to buy the troubled company amid reports about mismanagement of client funds and potential investigations by regulators.

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The House Financial Services Committee on Wednesday announced it would hold a hearing next month to investigate the company's collapse.

"The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds," committee Chair Maxine Waters said in a statement.

"Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year."

The lawsuit alleges the company used money from new investors to "pay interest to the old ones and to attempt to maintain the appearance of liquidity."

The collapse followed rising doubt over the financial stability of FTX. Attention had focused on the relationship between FTX and Alameda Research, a trading house also owned by Bankman-Fried, and reports he shifted funds out of the exchange, even as he tried to fill a $7 billion gap.

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It was a spectacular reversal of fortune for the founder and one-time cryptocurrency wunderkind Bankman-Fried.

The disgraced executive apologized on Twitter and resigned, but after the company filed for bankruptcy it said it was the victim of "unauthorized transactions."

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Source: AFP

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