The Golden State Warriors franchise is being sued over its promotion of FTX, adding to legal challenges bubbling up in the aftermath of the cryptocurrency company’s collapse.
The latest lawsuit, which targets the Warriors, disgraced FTX founder Sam Bankman-Fried, and Alameda Research CEO Caroline Ellison, was filed on Monday in San Francisco federal court. The suit alleges that the defendants engaged in “fraudulent and deceitful conduct” in order to reel in the money of “unsophisticated investors.”
The plaintiff is Elliott Lam, a Canadian citizen and resident of Hong Kong, who said that he sustained damages of $750,000 in his FTX yield-bearing account for which the defendants are liable. The lawsuit was proposed as a class action for a sum exceeding $5 million.
Lam contends that Bankman-Fried, Ellison, and the Warriors falsely represented that FTX was a “viable and safe way to invest in crypto,” tricking investors to invest with the company, according to a copy of the lawsuit.
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“The scale of this Ponzi-scheme-like fraud was matched only by the scale of the publicity campaign employed by Bankman-Fried and the FTX Entities to conjure up an illusion of financial and corporate success,” the lawsuit reads.
Lam, through his lawyers, also notes that internationally known celebrities and entertainment and sports figures were used by FTX to push investors to buy into and place trust in the company through an aggressive marketing campaign.
“These ‘brand ambassadors’ used their social media reach and personal brands to induce unsophisticated investors and consumers into a relationship with the FTX Entities,” the plaintiff asserts.
Last week, Oklahoma resident Edwin Garrison filed a complaint in Florida federal court targeting Bankman-Fried, in addition to Tom Brady, Gisele Bundchen, Stephen Curry, the Golden State Warriors, Shaquille O’Neal, Udonis Haslem, David Ortiz, William Trevor Lawrence, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin O’Leary.
In the complaint, Garrison asserts that the celebrities listed are liable because they “promoted, assisted in, and actively participated” in the alleged scheme. He said the defendants “aggressively marketed” the FTX platform.
“FTX were geniuses at public relations and marketing and knew that such a massive Ponzi scheme larger than the Madoff scheme could only be successful with the help and promotion of the most famous, respected, and beloved celebrities and influencers in the world,” said Adam Moskowitz, the attorney who filed the suit, in a statement provided to the Washington Examiner.
The Florida lawsuit estimates that the class action could potentially involve thousands “if not millions” of consumers nationwide who were enrolled in yield-bearing cryptocurrency accounts with FTX, which Garrison contends constitute unregistered securities.
FTX’s collapse has sent shock waves through the cryptocurrency world and has caused many investors to panic and sell off their crypto assets. Bitcoin has fallen to about $16,000, its lowest level in two years and a historic collapse from its peak of $69,000 just a year ago.
John Ray, the new CEO who took over the company from Bankman-Fried after it filed for bankruptcy, revealed his shock with the company in a filing this week in federal bankruptcy court.
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“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said.
“From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented,” he added.
