Sezzle - FInTech Tracker - September 2023

SBF Conviction Could Fuel FTX Celebrity Lawsuits


The criminal case against FTX founder Sam Bankman-Fried reached its climax last week.

The civil cases involving his former company, however, are ongoing.

Bankman-Fried’s conviction in what has been called one of the largest frauds in U.S. history could add momentum to a class-action lawsuit against the celebrity spokespeople who promoted his platform, Bloomberg reported Tuesday (Nov. 7).

Plaintiffs in the case “are going to benefit mightily from the investigative work of the government,” Daniel Richman, a professor at Columbia Law School, told Bloomberg.

“It’s not going to definitely prove their case but helps them considerably in shedding light on what was going on with FTX and Alameda,” he added, referring to the hedge fund affiliated with FTX, which collapsed last year.

Even before criminal charges had been filed against Bankman-Fried, a group of investors sued FTX’s celebrity endorsers — a group that includes Tom Brady, Gisele Bündchen, Stephen Curry and Larry David — for securities law violations, claiming they failed to do proper due diligence.

The suit was filed in federal court in Miami in November of last year, days after FTX declared bankruptcy and weeks before Bankman-Fried was charged with using customer funds to pay for investments, real estate purchases and political donations.

Legal experts argue the spokespeoples’ fame and wealth make them a prime target for investors trying to recoup the billions of dollars lost in FTX’s collapse, Bloomberg reported. Attorneys for the pitchmen have argued the investors have no claim, as the ads and sponsorships their clients took part in never specifically encouraged people to deposit money in FTX accounts.

Some of the defendants in the civil case could even point to Bankman-Fried’s conviction as evidence that — having given millions of dollars of their own money to FTX — they were “victims of the criminal enterprise and should not be liable at the civil level,” Braden Perry, a former federal regulatory enforcement attorney and partner at the firm Kennyhertz Perry, said in the report.

Bankman-Fried, 31, was convicted Nov. 2. The date was some poetic justice, as it was the one-year anniversary of an expose that “revealed to the world the giant hole at the empty center of the relationship between his two firms, the FTX cryptocurrency exchange and the crypto trading firm Alameda Research.”

Bankman-Fried is scheduled to be sentenced March 28 of next year, weeks after his second trial — on five additional charges — is set to begin.