Several civil lawsuits targeting prominent athletes following their promotion of crypto companies will likely take months or years more to unwind.
Cristiano Ronaldo, Mark Cuban and Tom Brady are among sports figures targeted by lawsuits following the crash in crypto markets. The 25-year sentence for FTX founder Sam Bankman-Fried last week ended one criminal chapter in the implosion of one of the world's biggest cryptocurrency exchanges. But several civil lawsuits -- including three that name prominent sports figures -- will likely take months or years more to unwind.
Cuban has argued that the assets he promoted for the now-bankrupt Voyager Digital weren't securities and as such were not subject to regulations related to promotional activity. Cuban also has argued that the court where the case is filed doesn't have jurisdiction over him. "It's not like selling sneakers," Charles Whitehead, a securities regulation expert and professor of business law at Cornell Law School, said."You're now selling a financial instrument. And there are rules. This is a heavily regulated industry. There are rules that regulate people, spokespeople, who, for compensation, are running around and touting a security. And so arguably, that's what the athletes have been doing.
During crypto's boom, which began in late 2020, athletes were among the most prominent ambassadors of cryptocurrencies and their exchange platforms -- such as FTX, Voyager Digital and Binance. Brady and NBA star Steph Curry joined Hollywood stars such as Larry David, who appeared in ads and posted on social media.
Sam Bankman-Fried was sentenced to 25 years after pleading guilty to seven counts of fraud and conspiracy tied to FTX's collapse. The fallout also led to several class-action lawsuits against athletes and celebrities who promoted Voyager, FTX and Binance. All of the cases have been filed in the U.S. District Court for the Southern District of Florida.
Cuban and his lawyers have said that the court where the case has been filed has no jurisdiction over Cuban and the team partly because they didn't target Florida customers. Brady, in his individual motion to dismiss the case, argues that his general promotion of FTX did not mention the"allegedly unregistered securities" and that the company's collapse"harmed" him as well. He also says that"no reasonable consumer would confuse these promotions for anything other than paid endorsements."
Another Binance lawsuit filed last year names NBA player Jimmy Butler as a defendant.
As early as 2017, the SEC issued a warning that cryptocurrency products could be considered"securities," and that celebrities could be held liable under federal securities law for promoting them without disclosing"the nature, scope, and amount of compensation received in exchange for the promotion."against DJ Khaled and boxing champion Floyd Mayweather Jr. for"failing to disclose payments they received for promoting investments in Initial Coin Offerings .
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