The company filed for bankruptcy on Friday after customers discovered that firms controlled by Sam Bankman-Fried and his associates were allegedly fraudulently intertwined, causing a liquidity crisis as users rushed to withdraw funds. The lawsuit, filed on Tuesday in the Southern District of Florida on behalf of investor Edwin Garrison and others affected by the company’s sudden failure, named as defendants former FTX CEO Sam Bankman-Fried and celebrity ambassadors who allegedly participated in the “fraudulent scheme” against unsophisticated investors.
The lawsuit argued that the brand ambassadors, many of whom received equity stakes in the company, neglected to perform “any due diligence” before marketing FTX to the public, adding that their failure to disclose “the nature, scope, and amount of compensation they personally received” in exchange for promoting FTX constitutes “a violation of the anti-touting provisions of the federal securities laws.”
Among the defendants listed were Tampa Bay Buccaneers quarterback Tom Brady and supermodel ex-wife Gisele Bündchen, who appeared in an advertisement for the company and held equity stakes. The lawsuit also noted that celebrity investor Kevin O’Leary assured the public that FTX was a reliable entity as recently as last month.
Other celebrities listed in the lawsuit include Golden State Warriors point guard Steph Curry, retired baseball player David Ortiz, basketball legend Shaquille O’Neal, comedian Larry David, and Jacksonville Jaguars quarterback Trevor Lawrence.
The lawsuit, citing “misrepresentations and omissions made and broadcast around the country through the television and internet” by the defendants, claimed that the celebrities were responsible for the “many billions of dollars” lost by the plaintiffs. A number of individual users and institutional clients still have as much as $8 billion remaining with the company, which Bankman-Fried has reportedly attempted to solicit from investors with little success.
Bankman-Fried, whose $15 billion net worth evaporated along with the collapsed company, commented via social media that his present goal is to “do right by customers” before shifting his focus to investors. Referencing his coverage from the media as a cryptocurrency wunderkind, some of which continued even after his company declared bankruptcy, Bankman-Fried asserted that his team was once “held as paragons of running an effective company.” Nevertheless, features “on the cover of every magazine” and attention as the “darling” of Silicon Valley caused him to grow “overconfident and careless.”
The young entrepreneur and his associates are presently under supervision by police in the Bahamas, where his company is headquartered, since they reportedly considered fleeing the country for Dubai, according to a report from Cointelegraph. Bahamian and American officials are working to transport Bankman-Fried out of the island nation as regulators seek to address the crisis. Members of the House Financial Services Committee will hold hearings on the situation next month, during which they plan to hear from Bankman-Fried and other executives involved in related entities, including competitor Binance, which nearly purchased FTX.
Bankman-Fried donated $39 million during the recent midterm election cycle on behalf of Democratic candidates and organizations, according to data from Open Secrets, which listed him as the nation’s sixth-largest individual midterm donor. FTX Co-CEO Ryan Salame donated heavily to right-leaning organizations, according to more data from Open Secrets.