Several high-profile celebrities – including the likes of NBA star Steph Curry and NFL great Tom Brady – are now in hot water after endorsing the now-bankrupt cryptocurrency trading platform FTX, as state regulators in Texas start a probe into their business dealings.
On Monday, director of enforcement at the Texas State Securities Board Joe Rotunda told Bloomberg News that his agency is indeed investigating payments made to entertainers and star athletes, who in turn promoted the failed crypto exchange run by the now-disgraced founder, Sam Bankman-Fried.
Rotunda added that they will be examining the extent to which these celebrity endorsers disclosed their financial stake in the company, on top of how accessible those discloses were to retail investors.
State Securities Board “Taking A Close Look” At Celebs Who Hawked FTX Crypto Exchange
“We are taking a close look at them,” Rotunda told Bloomberg News on Monday.
He went on to say that the celebrity endorsements are not the main focus of the FTX investigation, but rather only a part of the problem the State Securities Board is looking into.
Meanwhile, Texas officials are reportedly in contact with regulators in other states, who are similarly looking into securities violations by FTX and any affiliated business entities.
Celebrities have recently learned that their star-status doesn’t always automatically get them out of trouble, as regulators have aggressively sought after such endorsors of cryptocurrency.
Kim Kardashian was forced to pay a $1.26 million fine last month after similar charges were brought against her by the the Securities and Exchange Commission, The Shade Room reported at the time.
The agency claims Kardashian hawked cryptocurrency initiatives on her Instagram page, without telling her tens of millions of followers that she was essentially a paid celebrity representative of the company.
The reality TV star did not deny or admit to the charges.
Class Action Lawsuit Comes Months After Kim Kardashian, Floyd Mayweather Were Named In A Similar Lawsuit
Earlier this year, Kardashian, former Boston Celtics Star Paul Pierce and retired, undefeated boxing champion Floyd Mayweather were named in a lawsuit accusing them of misleading their social media fanbase into purchasing cryptocurrency in a “pump-and-dump” scheme, according to Bloomberg News.
And just last week, an Oklahoma resident named Elliot Lam filed a class-action lawsuit against FTX after opening a yield-bearing account with the company.
The suit names everyone from Brady, Curry, “Seinfeld” co-creator and “Curb Your Enthusiasm” star Larry David, Brady’s supermodel ex-wife Gisele Bündchen, Shaquille O’Neal, Udonis Hassles, Kevin O’Leary, David Ortiz and more.
The lawsuit filed by Lam also names the Golden State Warriors basketball team, whose roster includes Curry.
Brady and Bündchen had even appeared in commercials promoting FTX, and were both given equity stakes in the company for doing so, the outlet reports. FTX recently filed for bankruptcy protection after it was learned that customers deposits were being used to make risky bets thought a subsidiary research firm.
Brady, Gisele, & More Provided Commercials For FTX, Thereby Promoting A “Deceptive” Platform Critics Say
Larry David, too, appeared in a Super Bowl commercial for FTX, wherein he expresses his classic skepticism upon learning of cryptocurrency investment.
The lawsuit filed last week claims the celebrities promoted a “deceptive” platform that took advantage of vulnerable retail investors.
The class action suit paints the company as a “Ponzi scheme,” while also accuses FTX of unlawfully selling yield-bearing accounts with unregistered securities.
It depicts the company as “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 reads.
The company’ founder, Bankman-Fried, is also under intense scrutiny by federal regulators after being named in several lawsuits, including one by a Canadian resident of Hong Kong who alleges he lost $750,000 as a result of opening an FTX yield-bearing account.
Curry and the Warriors were not the only NBA team to get caught up in the crypto craze, with FTX having entered into a number of sports-related deals, some of which have since started crumbling.
Miami Heat, Dade County Announce They Are Terminating Relationship With FTX, Will Change Arena Name
Earlier this month, the Miami Heat and Miami-Dade County announced that they would move to terminate their relationship with FTX, and will rename the team’s arena which currently bears the company name.
Meanwhile, Bankman-Fried, just 30-years-old, has the company based in the Bahamas. Bloomberg News reports that sources close to the matter state U.S. and Bahamian authorities are discussing possible extraditing him back stateside.
Thus far, Bankman-Fried is said to be cooperating with investigators in the Bahamas. It remains very likely that he will soon be taken back to the U.S. for questioning.
However, it’s too soon to tell whether any possible criminal charges will be filed, Bloomberg reports.
The bottom began to fall out for FTX when fears over whether the company had sufficient capital caused customers to flee the exchange en masse. It ultimately ended up agreeing to sell itself to rival crypto exchange Binance, but the deal fell through due to prolonged periods of due diligence by Binance’s on FTX’s balance sheets.
The company had valued its assets between $10 billion and $50 billion, listing over 130 affiliated companies worldwide, per their bankruptcy filings.