1668878006 Ftx Lawsuit Tom Brady

Celebs like Tom Brady, Larry David did ads for crypto giant FTX. Now they’re getting sued

At its peak, crypto giant FTX was so big that it attracted celebrities such as tennis pro Naomi Osaka and actor Larry David to promote its brand. Now the collapse is shining a critical light on the industry — and drawing the stars into a lawsuit, too.

A lawsuit filed this week in Miami accuses FTX and its now-bankrupt CEO Sam Bankman-Fried of deceiving consumers into investing.

The lawsuit, which has yet to be certified, also names 12 celebrity “brand ambassadors” as defendants, including Osaka, David, quarterback Tom Brady, model Giselle Bündchen, basketball player Shaquille O’Neal and Canadian businessman Kevin O’Leary .

But the celebrity-studded lawsuit is just one chapter in the saga of Bankman-Fried’s collapsing crypto exchange, which filed for bankruptcy on Nov. 11.

The three-year-old empire — FTX, FTX.US and a trading firm called Alameda Research — once valued at $32 billion US is fast becoming another crypto cautionary tale.

Ftx Lawsuit Naomi Osaka
Naomi Osaka’s outfit during the Miami Open tennis tournament in April featured the FTX logo. (Wilfredo Lee/Associated Press)

Bankman-Fried oscillated from regret to defiance in tweets posted from his home in the Bahamas, saying he would raise $8 billion to fix FTX and then telling a Vox reporter, “F*** regulators [they] makes everything worse.”

The details of FTX’s meteoric fall are emerging in the bankruptcy proceedings.

‘Complete failure of controls’

John J. Ray, the new court-appointed CEO of FTX, says he has overseen many corporate failures in his 40-year career, including the liquidation of Enron, but said this week: “Never in my career have I not seen a complete. failure of corporate controls and such a complete absence of reliable financial information as occurred here.”

London crypto blogger David Gerard spoke to CBCs The current Friday and said Bankman-Fried came across as kind of a “nerdy, misunderstood business genius.”

But behind the scenes, bankruptcy filings now show that FTX shuffled money between entities — supporting each without any support, Gerard said.

“He knew he was broke. He went there nodding and smiling, but knew FTX was a dead company,” Gerard told CBC.

As for the celebrity endorsements, Gerard said stars were probably well paid.

Ny Premiere Of Hbo S Curb Your Enthusiasm
Larry David attends the premiere of HBO’s Curb Your Enthusiasm in 2017 in New York. David is one of 12 celebrities named in a lawsuit against FTX. (Charles Sykes/Invision/The Associated Press)

“It was a gig,” said Gerard.

And for investors, he said the draw was the promise “you can get rich for free. Who doesn’t want free money?”

FTX appeared strong and solvent until November.

But a balance sheet first obtained by the Financial Times and summarized in the Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware showed that FTX has about $1 billion in cash or cryptocurrency backed by U.S. dollars is – which was offset by $9 billion US. owed to customers.

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Bankman-Fried attends the 2022 Forbes Iconoclast Summit via video on November 3 in New York City. His cryptocurrency exchange FTX has since bled billions of dollars. (Arturo Holmes/Getty Images)

Ray, the new court-appointed CEO, called the FTX situation “unprecedented” and said the company was run by a “very small group of inexperienced, unsophisticated and potentially compromised individuals.”

He called Bankman-Fried’s continued tweets “irregular and misleading public statements.”

All this has left the cryptocurrency industry reeling.

“The more it’s exposed, the more those of us in the industry are in awe of just how much of a cluster f— … it’s just complete garbage,” said Brian Mosoff, CEO of Toronto-based Ether Capital.

Mosoff says this collapse will scare investors.

“You just have this monumental collapse of this enormous and respected entity seemingly overnight. Everyone is a little blindsided,” Mosoff said.

Fintech Crypto
Binance and FTX logos are seen in this illustration. Bankman-Fried blamed himself for FTX’s losses and details of what happened are now being revealed in US bankruptcy court. (Dado Ruvic/Reuters)

Ironically, the ad that Larry David filmed for FTX – portraying his character as a fool for rejecting crypto – now seems prescient.

The two-minute spot features David as a scrappy character who travels through time and expresses disdain for inventions ranging from the wheel to coffee to the light bulb, insisting they will never catch on. At the end of the two-minute spot, he rejects FTX. Now David is accused of being at fault for Americans’ trust in FTX.

Celebs face damaged reputations

Dave Pouliot, lawyer and Montreal founder of Coinmiles, says he’s not sure if actors can be held liable — but says they might think twice before endorsing another crypto-token-based venture.

“Their personal reputational risk is at stake here. I think these are actors, they’re being paid to publicly endorse a brand. So whether or not they can be found liable from a civil perspective, but reputational damage will be done. They are unlikely to appear in another advertisement of an investment nature,” said Pouliot.

His company does not take investor money, but instead offers bitcoin discounts to users. But Pouliot says he would like to see the industry move to regulate itself and build in better protection and education.

Ftx Lawsuit Tom Brady
Tampa Bay Buccaneers quarterback Tom Brady attends a news conference after a workout in Munich, Germany, on Nov. 11. He is one of the celebrities named in a lawsuit against FTX. (Matthias Schrader/Associated Press)

Part of the problem with FTX was how big its founder seemed.

Bankman-Fried is a former Massachusetts Institute of Technology physics student who worked at Jane Street, an elite financial firm. After founding FTX, he attracted top Silicon Valley investors and donated millions to politicians, who pushed for regulatory change.

It was after the rival owner of the world’s largest exchange questioned FTX’s stability that cracks appeared.

There was a three-day panic sell that cost FTX billions.

Binance CEO Changpeng Zhao considered buying FTX, but quickly backed off, citing regulators’ concerns. But further industry regulation is futile, says Mosoff.

“You can tick off as many regulatory checkboxes and paper filings as you want. If [bad actors] want to do something nefarious, they’ll find a way to do it,” Mosoff said.

Mosoff says the Mount Gox scandal – a Tokyo-based bitcoin exchange that imploded in 2014 – and Quadriga – the exchange whose founder Gerald Cotten died mysteriously in 2018 leaving the keys to $250 million in crypto assets to the grave took – didn’t scare people away for good.

He said the FTX saga will hopefully slow the swarms of “get-rich-quick” investors drawn by Bitcoin’s rise from $4,000 to a peak of $70,000 in 2020.

“People were blindly sending money in to buy these assets,” he said.

In the end, despite volatility, Mosoff believes when all the current drama shakes out, cryptocurrencies like bitcoin and ethereum will still retain their luster.

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