After FTX founder Sam Bankman-fried’s conviction, investors are targeting Larry David, Tom Brady and other FTX endorsers.
Lawsuit targeting celebrity endorsers
Sam Bankman-fried’s criminal fraud conviction came just as the FTX implosion was approaching its first anniversary. But for others who helped promote the cryptocurrency exchange, the legal fallout will continue for years.
Attention turns to a class-action suit in Miami federal court by investors who allege they lost billions in the collapse of FTX and seek to pin blame not just on Bankman-fried and his inner circle but also on celebrities who were paid to endorse it to the masses, as well as bankers, accountants and lawyers who propped up the empire’s legitimacy.
Flashy advertisements featuring Larry David and Tom Brady touting FTX were among the first bits of evidence shown to the jury at the start of a monthlong trial in Manhattan that culminated in Bankman-fried being found guilty last week of seven counts of fraud and conspiracy.
The class action, which seeks to cover hundreds of thousands of investors, alleges that celebrity endorsers and firms that provided financial and legal services to FTX would have seen red flags about the business if they had done proper due diligence. The Miami case seeks unspecified damages for the $8 billion that FTX “stole” from investors — and most of which “vanished.”
The guilty verdict for Bankman-fried doesn’t directly establish a central contention in the class action — that dozens of celebrities and other alleged enablers should have known he was up to no good when they signed on as advisers or brand ambassadors.
But the 31-year-old’s conviction for what Manhattan’s top federal prosecutor Damian Williams called “one of the biggest financial frauds in American history” will add momentum to the investors’ case, according to Daniel Richman, a professor at Columbia Law School.
‘Benefit mightily’
They “are going to benefit mightily from the investigative work of the government,” Richman said. “It’s not going to definitely prove their case but helps them considerably in shedding light on what was going on with FTX and Alameda,” the hedge fund affiliated with the exchange that also collapsed in November 2022.
Legal experts have said the celebrities’ prominence and wealth make them a juicy target for investors looking to recover some of their losses, with Bankman-fried broke. Targeted class-actions have reaped billions in settlements from banks and other players in past big-name business collapses, including Enron Corp. and Worldcom Inc.
Lawyers for the entertainers, sports figures and other celebrities — including Gisele Bundchen, Steph Curry and Shaquille O’neal — have argued the investors have no valid claims against them because the advertisements and sponsorships they were involved with didn’t encourage anyone to deposit money in FTX accounts. And the endorsers had no role at all in alleged losses tied to “FTX’S misappropriation and mismanagement,” the defense attorneys have said in a court filing seeking dismissal of the Miami case.
Some of those being sued could even use the guilty verdict to argue that having backed FTX with millions of dollars of their own money, they were “victims of the criminal enterprise and should not be liable at the civil level,” said Braden Perry, a former federal regulatory enforcement attorney and partner at law firm Kennyhertz Perry.