Sam Bankman-Fried (SBF) has struck a deal with a group of FTX customers to drop a class action lawsuit against him in exchange for his help in pursuing celebrity promoters of the now-defunct exchange.
The lawsuit alleges that Bankman-Fried and celebrities including comedian Larry David, and sports stars Shaquille O'Neal, Stephen Curry, Naomi Osaka, Tom Brady, as well as Brady's ex-wife Gisele Bundchen, are responsible for around $11bn of losses to consumers.
The disgraced co-founder of FTX, currently serving a prison sentence of 25 years for defrauding investors, will have to offer up information to support their suit. The deal is yet to be approved by a judge, but it would mean resolving all claims against SBF now and in the future. The plaintiffs hope that having SBF on their side will help them win and eventually recover some of their billions of dollars in losses.
FTX went all-in on sponsorship and celebrity endorsements, hard-selling the ease and accessibility of the platform as part of a global push to get users on board. FTX was everywhere, including on the bonnet of Mercedes’s Formula 1 car. In one particular deal, the NFL's Miami Heat sold the naming rights to their stadium for a staggering $139 million over 19 years.
Celebrities like Tom Brady and his former spouse, Gisele Bundchen, appeared in an FTX commercial in 2022, with Brady encouraging friends to join the exchange. The commercial ends with the punchy call to action: "Tom Brady is in. Are you?"
Larry David also starred in a hilarious multi-million-dollar Super Bowl ad for the company. The commercial features Larry rejecting cryptocurrency with the tagline "Don’t be like Larry." Meanwhile, Stephen Curry’s famous line in his FTX commercial, “I'm not a (crypto) expert, but I don't need to be,” has surely come back to haunt him.
The significance of the case extends beyond the criminal charges facing Bankman-Fried. It has the potential to establish a legal precedent where celebrities are held accountable for the products and services they endorse. This result could alter the sponsorship and endorsement market, which is worth billions. But is it likely?
According to one expert, Ari Redbord, Head of Legal and Government Affairs at TRM Labs, the question of responsibility is hard to prove. “Did Larry David know that SBF was commingling funds or about Alameda’s stake in FTX-issued FTT tokens? That would be difficult to believe, let alone prove by a preponderance of the evidence – the standard in a civil action. So, like much else in cryptocurrency regulation these days, the FTX lawsuits may hinge on whether or not FTX’s interest-bearing accounts were securities.”
Mark Botnick, a spokesman for Bankman-Fried, told Bloomberg that his client wanted to set things right. “Since the collapse of FTX, Mr Bankman-Fried has been singularly focused on returning the estate’s assets to customers, who could and should be made whole as of current prices.”
With Brady reportedly making $55 million for his time devoted to FTX, it's clear the class action wants to go where the money is. We will be keeping an eye on developments.
