Investors not only are suing Sam Bankman-Fried, but also celebrity endorsers of his bankrupt crypto company FTX, including Tom Brady, ex-wife Gisele Bündchen and comedy legend Larry David.
The embattled founder behind the collapsed $US32 billion ($A47 billion) cryptocurrency exchange faces criminal investigation in the Bahamas and a potential trip to the US for questioning over the disappearance of billions of dollars in customer funds.
Lawyers, including star litigator David Boies, filed the lawsuit on behalf of Edwin Garrison, an Oklahoma resident who had an FTX yield-bearing account which he funded with crypto assets to earn interest, and others like him, The New York Post reports.
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Bankman-Fried, whose net worth was valued as high as $17 billion at one point, is now broke — a shocking fall from grace for someone once widely hailed as a genius in the cryptocurrency industry. When the crypto exchange faltered on liquidity concerns, US investors sustained $11 billion in damages, the lawsuit alleges. The proposed class action filed late Tuesday in Miami alleges that FTX yield-bearing accounts were unregistered securities that were unlawfully sold in the US. FTX had entered into a number of sports-related deals, some of which are crumbling. The NBA’s Miami Heat and Miami-Dade County decided Friday to terminate their relationship with FTX, and will rename the team’s arena. Earlier on Friday, Mercedes said it would immediately remove FTX logos from its Formula One cars. FTX was “ultimately a Ponzi scheme, misleading customers and prospective customers with the false impression that any cryptocurrency assets held on the Deceptive FTX Platform were safe and were not being invested in unregistered securities,” the lawsuit states. Brady and Bündchen, who also appeared in commercials touting FTX, bought equity stakes in the company, which was forced to file for bankruptcy protection last week after it was learned that customer deposits were being used to make risky bets through a subsidiary research firm. Meanwhile, Bankman-Fried could be in hot water with federal investigators. Sources familiar with the matter told Bloomberg News that US and Bahamian authorities have been discussing possibly extraditing the 30-year-old Bankman-Fried, whose company is based in the Bahamas, stateside. Bankman-Fried is said to be co-operating with investigators in the Bahamas. It is likely that he would be brought back to the US for questioning, though it is premature to discuss any possible criminal charges, according to Bloomberg. After FTX filed for bankruptcy, Bankman-Fried took to Twitter and said he was “shocked to see things unravel the way they did.” Customers fled the exchange over fears about whether FTX had sufficient capital, and it agreed to sell itself to rival crypto exchange Binance. But the deal fell through while Binance’s due diligence on FTX’s balance sheet was still pending. FTX had valued its assets between $10 billion to $50 billion, and listed more than 130 affiliated companies around the world, according to its bankruptcy filing. — This story originally appeared on nypost.com and has been republished with permission
