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FTX Entities, Athletes Named In Class Action Lawsuit

On Tuesday, multiple plaintiffs filed a class action complaint in the District Court for the Southern District of Florida against FTX entities, Sam Bankman-Fried (former Chief Executive Officer of FTX), and multiple celebrities and athletes, including Tom Brady, Stephen Curry, Naomi Osaka, and Larry David. The lawsuit relates to FTX’s sale of yield-bearing cryptocurrency accounts and the athletes’ promotion of FTX.

As a brief background, the FTX entities were established in 2019, operating as a marketplace for trading crypto assets. FTX quickly gained popularity amongst new and experienced investors, with billions of dollars traded daily on the marketplace.

In November, CoinDesk issued a report detailing FTX’s operations. Within days, customers withdrew over $5 billion from the marketplace, which FTX could not fulfill. Shortly after, Sam Bankman-Fried announced that Binance would purchase FTX. The next day, Binance announced it would not purchase FTX due to mishandled customer funds and a potential federal investigation, effectively forcing FTX into Chapter 11 bankruptcy.

Much of the class action complaint revolves around FTX using the athletes/celebrities “to raise funds and drive American consumers to invest in the [yield-bearing accounts] . . . pouring billions of dollars into the Deceptive FTX Platform to keep the whole scheme afloat.” At the same time, the athletes/celebrities’ promotions “made and broadcast around the country through television and internet render them liable to [the plaintiffs] for soliciting their purchases of the [yield-bearing accounts].”

Despite FTX insisting that the yield-bearing accounts are not securities, the plaintiffs allege that they are securities as defined in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). Specifically, FTX offered “interest rewards on crypto assets held in the [yield-bearing accounts] . . . . [then] the FTX [e]ntities pooled the [yield-bearing account] assets to engage in lending and staking activities from which they derived revenue to pay interest on the [yield-bearing accounts].” Thus, the yield-bearing accounts constitute securities.

As the plaintiffs allege, since an FTX yield-bearing account is not a federally covered security nor registered under Florida statutes, FTX and the athletes/celebrities (as directors, officers, partners, or agents) have violated the Florida Securities and Investor Protection Act.

Building on the Florida Securities and Investor Protection Act violation, the plaintiffs also allege violations of the Florida Deceptive and Unfair Trade Practices Act. According to the plaintiffs, FTX and the athletes/celebrities misled consumers regarding FTX’s platform and yield-bearing account, including assuring consumers that they were not investing in securities, thereby inducing consumers to spend billions on the marketplace.

In addition, the plaintiffs include a claim for civil conspiracy against FTX and the celebrity athletes, alleging that FTX and the celebrity athletes conspired to misrepresent the FTX platform and induce the plaintiffs to invest in the yield-bearing accounts, which caused the plaintiffs to lose their investments.

The Securities and Exchange Commission (SEC) has previously charged celebrities for touting cryptocurrency. Earlier this year, Kim Kardashian paid $1.26 million to settle the SEC’s charges against her for touting EthereumMax without disclosing the payment she received for promoting the product—a violation of federal securities laws’ anti-touting provision. Here, the plaintiffs appear to be aiming at a similar outcome.

Over the past year, cryptocurrency exchanges have invested heavily in professional sports. With FTX failing, leagues, teams, and athletes could start distancing themselves from cryptocurrency—the Miami Heat recently removed FTX from the team’s arena. Despite FTX filing for bankruptcy, the company will not be out of the news soon.

Landis Barber is an attorney at Safran Law Offices in Raleigh, North Carolina. You can connect with him via LinkedIn or via his blog He can be reached on Twitter @Landisbarber.

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