FTX Drama: Investors Assess What's Next for Crypto
FTX and former chief executive officer Sam Bankman-Fried were sued by an investor over claims that the cryptocurrency exchange now in crisis targeted “unsophisticated investors” using celebrity endorsers including Tom Brady and Stephen Curry, who are also named as defendants.
In a complaint filed Tuesday in federal court in Miami, Oklahoma resident Edwin Garrison is asking to represent a class of “thousands, if not millions, of consumers nationwide.” That includes all investors in the US who were enrolled in yield-bearing FTX crypto accounts, which he alleges constitute unregistered securities in violation of US and Florida laws.
Garrison claims FTX used celebrities including Curry, Brady, Gisele Bundchen and Shaquille O’Neal to promote the exchange’s unregistered securities and funnel investors into a Ponzi scheme. Football star Brady and his then-wife Bundchen filmed a commercial called “FTX. You In?” that showed them encouraging acquaintances to join the platform, according to the complaint.
Representatives of Brady and Bundchen didn’t immediately respond to emails seeking comment on the suit.
“FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors from across the country, who utilize mobile apps to make their investments,” Garrison said in the suit. “As a result, American consumers collectively sustained over US$11 billion” in damages.
Garrison’s legal team said in the lawsuit that it had found “many incriminating FTX emails and texts” but didn’t say what was in them or what made them incriminating.
The suit, which seeks unspecified damages, is the first to be filed against Bankman-Fried and his companies since FTX’s bankruptcy court filing, as investors start jockeying to recover whatever losses they can. The bankruptcy filing for protection from creditors may limit Garrison and others in efforts to get their money back. FTX and its related companies may have more than a million creditors, according to court filings.
Garrison is represented by the Boies Schiller Flexner law firm and by Adam Moskowitz, a Florida lawyer who last December filed a suit against crypto broker Voyager Digital Ltd., alleging it misled customers by charging hidden fees on transactions. Voyager opposed the claims. That case has been delayed by Voyager’s own bankruptcy court filing.
Meanwhile, the collapse of FTX has thrown a wrench into Voyager’s plan to sell its assets to the company for US$1.4 billion.
The case is Garrison v. Bankman-Fried, 22-cv-23753, US District Court, Southern District of Florida (Miami).