FTX had no shortage of endorsements, including from top A-list celebrities like Steph Curry, Tom Brady, Naomi Osaka and Shaquille O’Neal. Now at least two of the beloved athletes are under investigation by a Texas regulator for serving as ambassadors for the collapsed crypto exchange.
Joe Rotunda, the director of enforcement at the Texas State Securities Board, told Bloomberg News he is scrutinizing payments celebrities received to endorse the company. “We are taking a close look at them,” Rotunda said, noting the stars “aren’t the most immediate priority, [but] they’re still a focus in the regulator’s large probe into FTX’s collapse.”
The news comes a week after Curry, Brady, O’Neal, Brady’s ex-wife, model Gisele Bundchen, and others were named in a class action lawsuit filed in Miami after FTX filed for Chapter 11 bankruptcy on Nov. 11.
The lawsuit accuses 30-year-old FTX founder Sam Bankman-Fried, the company and its celebrity endorsers of using the ambassadors’ star power to “take advantage of unsophisticated investors from around the country.”
“FTX’s business was based upon false representations and deceptive conduct,” the lawsuit states. “Although many incriminating FTX emails and texts have already been destroyed, we located them and they are evidence of how FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors from across the country who utilize mobile apps to make their investments.”
Curry, Brady and Bundchen had the most visible FTX commercials.
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“I’m not an expert and I don’t need to be. With FTX I have everything I need to buy, sell and trade crypto safely,” Curry says in his 30-second commercial for the platform, which Shaq does the voiceover for.
In Brady and Bundchen’s commercial, the couple calls various people about using FTX. “I’m getting into crypto with FTX. You in?” Brady says after being encouraged by Bundchen.
The problem is there should have been language on the commercials to denote it was a paid advertisement or state it was not a celebrity endorsement. There was none.
John Olson, a retired securities lawyer and former Georgetown University law professor, told Bloomberg the failure to do so violates securities law.
“If a celebrity says, ‘I’ve looked into this investment and it’s terrific and you ought to put your money into it’ — and if they haven’t looked into it, that could be a misrepresentation,” Olson said.
“If what’s being marketed is deemed to be a security, they’re basically doing something that may very well violate state securities laws,” Olson continued.
Osaka, who was also named in the class action lawsuit, became the first female FTX ambassador in 2021, in exchange for an equity stake in FTX Trading Limited and compensation, according to a report by CoinDesk.
Based in the Bahamas with a subsidiary in the United States, FTX allowed users to buy and sell digital currencies. After weeks of Bankman-Fried denying the exchange was in trouble, the exchange filed for bankruptcy and users reported being unable to withdraw assets.
Binance, the world’s largest crypto exchange and a rival of FTX, announced plans to purchase the platform and bail it out but withdrew the offer after doing due diligence into the state of FTX.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance wrote in a Twitter thread on Nov. 9.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance continued.
The FTX logo appears on home plate umpire Jansen Visconti’s jacket at a baseball game with the Minnesota Twins on Tuesday, Sept. 27, 2022, in Minneapolis. (AP Photo/Bruce Kluckhohn, File)
Golden State Warriors guard Steph Curry in the second half of Game 3 of an NBA basketball first-round Western Conference playoff series Thursday, April 21, 2022, in Denver. (AP Photo/David Zalubowski)
Shaquille O’Neal attends the Sports Illustrated Sportsperson of the Year Awards at the Ziegfeld Ballroom on Monday, Dec. 9, 2019, in New York. (Photo by Andy Kropa/Invision/AP)
Japan’s Naomi Osaka clenches her fist after scoring a point against Amanda Anisimova of the U.S. during their first round match at the French Open tennis tournament in Roland Garros stadium in Paris, France, Monday, May 23, 2022. (AP Photo/Christophe Ena)