A federal judge in Florida dismissed nearly all of the claims in a lawsuit against the celebrity endorsers of massive cryptocurrency fraud FTX.
The endorsers include several sports figures: Naomi Osaka, Tom Brady, his ex-wife Gisele Bündchen, Stephen Curry, and Shohei Ohtani were among those who appeared in FTX ads and were named in the lawsuit.
The judge, K. Michael Moore, ruled that the plaintiffs “fail to plausibly allege Defendants’ knowledge of FTX’s fraud.”
FTX spectacularly collapsed in 2022 amid revelations that founder Sam Bankman-Fried was moving billions of dollars of customer funds among several companies that he controlled.
Bankman-Fried is now serving a 25-year prison sentence in a Brooklyn prison after he was found guilty of several counts of fraud.
Included in the dismissal was NBA legend Shaquille O’Neal, who settled out of the lawsuit in April.
Moore found that the celebrities, some of whom appeared in commercials to promote the cryptocurrency, including Curry and comedian Larry David, didn’t intend to deceive customers, but described their actions as “uninformed, negligent, or even reckless.” Moore added that the celebrities weren’t responsible for investors’ losses because they had no prior knowledge of FTX’s fraud.
Curry was paid $35 million to promote FTX, according to Michael Lewis, who wrote a positive biography about Bankman-Fried and the company. Lewis also said that Brady was paid $55 million for his FTX commercials.
“Defendants cannot be found liable for civil conspiracy for merely receiving payments and other monetary benefits in exchange for their promotional content,” Moore wrote.
In their complaint, investors alleged the celebrity endorsers “should have known” about potential fraud or business issues with FTX, and unregistered crypto securities because of their “substantial investment experience” among other claims, which included the defendants’ access “to obtain outside advisors” or “experience with sponsorship deals.” In the allegation for intent to deceive, the plaintiffs argued the endorsers had seen “red flags of fraud.”
But Moore disagreed, writing in his dismissal that “red flags” don’t always correlate with actual proof.
“In the extensive list of promotions, advertisements, and statements, Plaintiffs have not provided any details related to Defendants’ alleged scheme to engage in knowingly false or deceptive practices, other than that Defendants promoted the FTX products in exchange for a substantial compensation package,” Moore wrote.
Moore dismissed 12 claims without prejudice including alleged aiding and abetting of FTX’s fraud in multiple states including Florida, California and for the same allegations of aiding the company’s conversion of its funds in multiple states. The only claims he kept were separate ones under Florida and Oklahoma law that prohibit the selling of unregistered securities. The case will proceed with those two allegations, but they are not related to holding the celebrities liable for FTX’s fraud.
Attorneys for the endorsers did not immediately respond to a request for comment from Front Office Sports.
The lawsuit was originally filed in November 2022 and accused the celebrity investors and Bankman-Fried of colluding to get uneducated investors across the country to invest in the currency on their mobile devices. The athletes and celebrities filed motions to dismiss in September 2023, alleging failure to state a claim.
Bankman-Fried is currently appealing his fraud conviction in the 2nd Circuit court.
