FTX to Drop Claims Against SBF, Eye Bigger Legal Targets

Investors and customers of crypto exchange FTX have reached a deal to drop all legal lawsuits against Sam Bankman-Fried (SBF), the exchange’s co-founder. In return, they could get Bankman-Fried’s assistance in separate lawsuits against other defendants.

It looks like jilted FTX investors are shifting their attention to celebrities who promoted the now-defunct crypto exchange.

According to a stipulation of settlement recorded on April 19, 2024, Bankman-Fried has agreed to disclose information and documents about FTX’s connections with several entities and individuals.

The list includes a number of A-listers, from sports stars like Tom Brady, Shaquille O’Neal, Stephen Curry, and Shohei Ohtani to supermodel Gisele Bundchen and actor Larry David.

Some of the major firms allegedly associated with the failed crypto exchange are Formula 1 Racing, SoftBank Group, SkyBridge Capital, and Sequoia Capital, among others.

SBF is Terrified

SBF’s willingness to cooperate might not come as a surprise. Other personnels in his inner circle, including FTX former executives Gary Wang, Caroline Ellison and Nishad Singh, previously agreed to settle the investor lawsuit by providing more confidential documents and contacts involved in this Ponzi scheme.

Investors believe suing promoters could yield more money than pursuing a lawsuit against Bankman-Fried. It’s been estimated that they could recover around $1.3 million. Investors believe SBF’s cooperation will be valuable in winning lawsuits against the promoters.

Upon the agreement, FTX’s former CEO would also hand over information that could support the case against FTX and help recover investors’ losses, which includes all non-privileged documents related to FTX’s investments in Anthropic, an artificial intelligence (AI) startup.

FTX invested $500 million in Anthropic in 2021, equivalent to 8% of stake. In March this year, the company decided to sell a major part of shares as part of its plans to compensate customers.

The latest development comes amid Bankman-Fried’s ongoing appeal against his conviction. Following his 25-year prison sentence, the former FTX CEO told ABC News he regretted the decisions made during the crisis.

He expressed he could have simply paid customers back immediately, avoiding the year-long extension of their losses. However, Bankman-Fried insisted he never believed his actions were illegal.

Celebrity Endorsers Under Scrutiny

The FTX collapse left countless investors in financial ruin. Now, the focus shifts to the celebrities and influencers who promoted FTX.

In November 2022, just a few weeks after FTX declared insolvency, FTX investors initiated a class-action lawsuit against the exchange and its leader. Besides, they also named a number of celebrities who took part in promoting the exchange.

With the spotlight now on high-profile celebrities, the already-famous case is likely to attract even more media attention. This double-edged sword could raise awareness of financial fraud within the cryptocurrency space while also generating outrage from fans of the implicated celebrities. It also raises questions about celebrity responsibility when promoting financial products.

Several celebrities, including Gisele Bundchen, have already denied any wrongdoing or knowledge of FTX’s issues. Bundchen said previously she was “blindsided” by the shocking implosion of FTX.

FTX, once a major player in the cryptocurrency exchange market, experienced a dramatic downfall in late 2022. Founded in 2019 by Sam Bankman-Fried, FTX promised a user-friendly platform for buying and selling digital currencies. However, behind the scenes, FTX was using funds from a sister company, Alameda Research, to keep things afloat.

In November 2022, tensions between FTX and another major rival, Binance, triggered a wave of panic among FTX customers. Fearing the worst, customers rushed to withdraw their money from the exchange. This mass exodus of funds created a domino effect. As more customers withdrew, the value of FTX’s own token, FTT, began to plummet.

The decline weakened FTX’s financial position, creating a domino effect that ultimately led to its downfall.

The exchange eventually filed for bankruptcy protection in November 2022 and Bankman-Fried stepped down as CEO. Regulatory investigations soon followed, focusing on Bankman-Fried’s financial maneuvers with Alameda Research. In late March, he was sentenced to 25 years in prison for fraud.

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