Celebrity Endorsers Cleared in FTX Fraud Lawsuit, Some Claims Still Active
A U.S. District Judge has dismissed the majority of claims against high-profile celebrities connected to the collapsed cryptocurrency exchange FTX, emphasizing that plaintiffs failed to establish that these stars were aware of any fraudulent activities. The lawsuit, which includes names like Tom Brady, Naomi Osaka, Stephen Curry, comedian Larry David, and "Shark Tank" judge Kevin O’Leary, aimed to hold them accountable for promoting the now-defunct crypto platform.
Judge K. Michael Moore highlighted a lack of evidence that the endorsers had knowledge of any wrongdoing, stating, "While this behavior demonstrates that defendants were uninformed, negligent, or even reckless, it does not demonstrate that defendants had any knowledge of FTX’s fraud, nor that they had the requisite intent to deceive or defraud investors." However, the judge noted that the plaintiffs could amend their complaints, leaving part of the case regarding the promotion of unregistered securities active.
FTX, prior to its shocking downfall in November 2022 and subsequent bankruptcy, was bolstered by celebrity endorsements and substantial partnerships with sports teams. The exchange, once a major player in the crypto sector, allowed users to trade digital currencies until mismanagement by its founder, Sam Bankman-Fried, led to its collapse. Bankman-Fried is currently serving a 25-year sentence for fraud and other offenses, while his legal team has asserted that he was "presumed guilty" during the trial process.
The implications of this ruling highlight the complexities surrounding celebrity endorsements in the cryptocurrency arena, leaving room for further legal developments. The ongoing litigation could reshape how public figures engage with emerging financial markets.
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