High profile athletes including Naomi Osaka named in FTX lawsuit
The GIST: FTX’s most famous backers might need to lawyer up. Several high-profile athletes and celebrities were named as defendants in a class action suit filed against the cryptocurrency exchange on Tuesday. The lawsuit asserts that each celeb’s endorsement makes them liable for promoting the now-bankrupt company’s faulty business model.
The details: Tennis star Naomi Osaka is one of many listed in the suit, as are NFL quarterback (QB) Tom Brady, NBA greats Steph Curry and Shaquille O’Neal and model Gisele Bündchen. The plaintiff argues that celebrity approval boosted FTX’s credibility, misleading users into making poor investments.
- This isn’t the plaintiff’s first rodeo. Pierce Robertson also sued Voyager Digital and Mark Cuban (owner of the NBA’s Dallas Mavericks) in July after the crypto brokerage filed for bankruptcy protection.
The fallout: The lawsuit is just one of FTX’s many woes. It may have more than a million creditors, and the U.S. House Financial Services Committee will hold hearings on the exchange’s collapse next month and plans to interview founder Sam Bankman-Fried. FTX is also under criminal investigation in the Bahamas, where it was based.
- The industry as a whole is feeling the heat. Investment bank Genesis Global Trading halted new loan originations and redemptions on Wednesday, and exchange Gemini paused withdrawals the same day.Asset lender BlockFi, meanwhile, may soon become the latest to file for bankruptcy protections after admitting it had significant exposure to FTX.
Zooming out: While athletes and influencers usually align with brands in financially stable industries, crypto winter brings new scrutiny to endorsements. They may have contributed to a false narrative of getting in early on a booming business, but how could they know better when regulators are still figuring out how to manage the industry?
- A recent decision doesn’t favor the defendants. Just last month, the Securities and Exchange Commission charged reality TV star Kim Kardashian for failing to disclose a payment to promote the blockchain EthereumMax.