A host of Hollywood and sports celebrities including Larry David and Tom Brady have been named as defendants in a class-action lawsuit against cryptocurrency exchange FTX, arguing that their celebrity status made them culpable for promoting the firm’s failed business model.
FTX has been in the public eye for more than a week, after the third-largest cryptocurrency exchange ended up with billions of dollars worth of losses and had to seek bankruptcy protection.
The Bahamas-based company and its founder, Sam Bankman-Fried, are under investigation by state and federal authorities for allegedly investing depositors’ funds in ventures without their approval.
Legislators also announced plans to investigate the failure of FTX, with the House Financial Services Committee saying it plans to hold a hearing on FTX in December.
Before its failure, FTX was known to use high-profile Hollywood and sports celebrities to promote its products.
It had the naming rights to a Formula One racing team as well as a sports arena in Miami.
Its adverts featured Seinfeld creator David, as well as Brady, the star quarterback of the Tampa Bay Buccaneers, basketball players Shaquille O’Neal and Stephen Curry, and tennis star Naomi Osaka.
The lawsuit filed late on Tuesday alleges that these sports and TV celebrities brought instant credibility to FTX, and should be held just as culpable as Mr Bankman-Fried.
“Part of the scheme employed by the FTX Entities involved utilising some of the biggest names in sports and entertainment – like these Defendants – to raise funds and drive American consumers to invest … pouring billions of dollars into the deceptive FTX platform to keep the whole scheme afloat,” the lawsuit said.
Class-action lawyer Adam Moskowitz pointed to previous cases where the US government fined celebrities Kim Kardashian and Floyd Mayweather for promoting crypto.
“The crypto industry needed celebrity endorsers to get any credibility,” Mr Moskowitz said.
The plaintiff in the case is Pierce Robertson, who is also involved in a case involving Voyager Digital, another failed cryptocurrency company that was endorsed by Dallas Mavericks owner Mark Cuban.
Voyager Digital failed for bankruptcy protection this summer, but FTX had pledged to buy Voyager’s assets for 1.4 billion dollars (£1.1 billion), which would have led to financial relief for Voyager’s depositors.
FTX’s failure now puts its aid to Voyager in question.
The lawsuit was filed in the Southern District of Florida.
Mr Moskowitz is the lawyer representing the victims in the collapse of a residential tower in Surfside, Florida.
David Boies, who represented the US government against Microsoft in the 1990s and Al Gore in the 2000 election, is also named as a lawyer on the case.
