In brief
- Celebrity endorsers of collapsed crypto exchange FTX were mostly let off the hook this week.
- The judge said that plaintiffs couldn’t prove that stars like Larry David, Naomi Osaka, and Tom Brady were aware of FTX’s fraud.
- However, part of the lawsuit about celebrities endorsing unregistered securities remains in play.
A judge on Thursday dismissed most—but not all—claims against high-profile celebrities sued for promoting collapsed crypto exchange FTX.
In an opinion filed Wednesday, U.S. District Judge K. Michael Moore said that FTX investors taking legal action against the celebrities had failed to prove that the stars had knowledge the crypto exchange was fueled by fraudulent activities.
The celebrities named in the lawsuit include sports stars like Tom Brady, Stephen Curry, and Naomi Osaka, the Golden State Warriors basketball team, comedian Larry David, and “Shark Tank” judge Kevin O’Leary.
“While this behavior demonstrates that defendants were uninformed, negligent, or even reckless, it does not demonstrate that defendants had any knowledge of FTX’s fraud, nor that they had the requisite intent to deceive or defraud investors,” the judge wrote of the celebrities.
Judge Moore noted that plaintiffs could amend their complaint and sue the celebrities again. And part of the lawsuit filed against defendants alleging that they promoted unregistered securities remains active.
Before its sudden downfall and subsequent bankruptcy filing in November 2022, FTX had celebrity backing and a number of deals with sports teams. Its criminal boss, Sam Bankman-Fried, donated money to political parties and was himself an increasingly prominent figure.
FTX was a huge crypto brand, and its exchange allowed customers to buy, sell, and bet on the future price of major digital coins and tokens.
But FTX’s eccentric CEO, Bankman-Fried, criminally mismanaged the exchange with his associates, mainly by using customer cash to cover risky bets made elsewhere in the business.
This eventually caused the company’s 2022 bankruptcy and billions of dollars in investor cash to disappear. Bankman-Fried is now serving a 25-year jail sentence for fraud and other crimes. He filed an appeal last fall, with his legal team claiming that the disgraced crypto mogul was “presumed guilty” heading into the trial.
Edited by Andrew Hayward
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