FTX, a prominent cryptocurrency exchange, is facing a proposed class action lawsuit in Miami alleging that its yield-bearing accounts were unregistered securities that were unlawfully sold in the United States. The lawsuit seeks damages from FTX founder Sam Bankman-Fried, as well as several celebrities who promoted FTX, including comedian Larry David and the Golden State Warriors, a National Basketball Association team. In response, the celebrity promoters and the Warriors have filed court papers stating that they did not cause the investors’ losses and should not be held liable for the alleged securities violations.
The lawsuit, filed by investors, accuses FTX and its promoters of failing to disclose the compensation they received for promoting the yield-bearing accounts, which the investors claim were sold as securities in violation of federal laws. The celebrities and the Warriors, however, argue that they did not specifically promote the accounts in question and should not be held responsible for the investors’ losses. They further contend that the investors’ interpretation of liability would be overly broad and unreasonable, suggesting that actors in any brokerage advertisement could be held liable for any securities purchased by individual users using the brokerage’s services.
Comedian Larry David, known for his roles in popular TV shows “Seinfeld” and “Curb Your Enthusiasm,” starred in a commercial for FTX that aired during the 2022 Super Bowl. In the commercial, David portrayed fictional characters dismissing important innovations throughout history and ended with the message “Don’t Miss Out on Crypto.” The lawsuit alleges that David and other celebrity promoters failed to disclose their compensation for promoting FTX, leading to the alleged securities violations.
FTX founder Sam Bankman-Fried, who is also named in the lawsuit, has argued that the case against him should be paused while he faces separate criminal charges in New York. Bankman-Fried, 31, has been charged by prosecutors with stealing billions of dollars in FTX customer funds to cover losses at his company, Alameda Research, and making illegal political donations to buy influence in Washington, D.C. He has pleaded not guilty to the charges.
The investors in the lawsuit have not yet responded to the court papers filed by the celebrity promoters and the Warriors. It remains to be seen how the court will ultimately rule on the case and the liability of the celebrity promoters and FTX founder Sam Bankman-Fried.
As the cryptocurrency industry continues to evolve and face increasing regulatory scrutiny, this lawsuit serves as a reminder of the potential legal risks and responsibilities associated with promoting and participating in cryptocurrency exchanges and investment opportunities. Investors and celebrities alike must be aware of and comply with applicable securities laws to avoid potential legal consequences.
In conclusion, the investor lawsuit against FTX and its celebrity promoters highlights the complex legal landscape surrounding cryptocurrency exchanges and investments. While FTX and its founder Sam Bankman-Fried face allegations of securities violations, the celebrity promoters, including Larry David and the Golden State Warriors, have defended themselves by stating that they did not cause the investors’ losses and should not be held liable. The outcome of the lawsuit remains uncertain, and it underscores the importance of compliance with securities laws in the rapidly evolving world of cryptocurrencies.
