Tom Brady, Gisele, Steph Curry are now part of the FTX legal mess

On Wednesday, Oklahoma’s Edwin Garrison filed a class-action lawsuit on behalf of FTX users, describing the company as a “Ponzi scheme” and saying the celebrities had endorsed unlicensed securities. In addition to FTX, other defendants in the lawsuit include NFL star Tom Brady and his supermodel ex-wife Gisele Bundchen, NBA legends Steph Curry and Shaquille O’Neil, MLB’s David Ortiz and Shohei Ohtani, and the Golden State Warriors.

The lawsuit, filed in Miami, says the damages exceed the $5 million minimum required to bring the case in federal court and that Garrison is seeking to represent “thousands” or “millions” of other clients holding securities in the form bought from interest-bearing accounts.

The lawsuit is just the latest in the implosion of FTX, which until 10 days ago was considered a $30 billion blue-chip crypto company but has since been revealed to have been involved in shady accounting and looting of risky customer accounts investments.

While it’s common for class action lawyers to file complaints — sometimes frivolous ones — after every business scandal, this could prove to be a hassle for the celebrities, as among the attorneys bringing the case is David Boies, a super attorney who handles numerous cases represented before the Supreme Court.

The complaint portrays FTX as a scam to defraud inexperienced investors and says the lawyers recovered numerous text messages and emails that FTX attempted to destroy. It also includes images showing Brady, Bundchen, Curry and others hyping FTX. Here is a sample and accompanying text from the complaint:

The legal case

Garrison accuses FTX and the celebrities of violating Florida’s securities and consumer protection laws and participating in an illegal civil conspiracy. However, these claims are based on an important point of fact: that FTX’s US subsidiary steered customers to its foreign exchange, where they could buy “return accounts” and earn interest rates of up to 8% for lending cryptocurrencies like Ethereum.

This is important as FTX has long held the view that Americans are not allowed on the foreign exchange and potential users are blocked from using it. However, Garrison claims that although he signed up through the subsidiary, an app called FTX US, and positively identified himself as a US citizen, the app showed him ads that led him to the more revealing foreign version.

“Despite the fact that I identified myself by name and address, the FTX trading app now shows that I am earning returns on ETH. The rate of return is valued at 8 percent APR,” says Garrison. “I was able to access the return product after following a link to the FTX Trading App on the FTX US website.”

This detail about yield-bearing accounts seems crucial to Garrison’s argument that FTX was an illegal Ponzi scheme — particularly because it dangled high yields to lure later investors into handing over money used to repay earlier investors.

The complaint also concludes that the accounts were securities, although U.S. law does not address when a crypto is a security.

If a federal judge accepts these claims that FTX US directs customers to the foreign exchange where they traded securities, it could create significant problems for the celebrities named in the lawsuit. FTX has already filed for bankruptcy, a process that will see its remaining assets wiped out by investors and other creditors, meaning it likely won’t have money to pay a class action lawsuit – but that’s not the case with Brady and others, who presumably have deep pockets that lawyers will target if they win in court.

The class action lawsuit doesn’t appear to be an open case and it’s possible it will be settled before it lands in a courtroom, but at least the lawsuit underscores the dangers of celebrities supporting crypto.

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