Former billionaire crypto bro Sam Bankman-Fried has been found guilty on all 7 counts of fraud and conspiracy to commit fraud, now awaiting sentencing that can go as high as 115 years in prison.
So, that must mean that the story is now over and done with, right? Hardly.
To begin with, there’s already another criminal trial against SBF tentatively scheduled for March, 2024.
His criminal fraud conviction came just at the first anniversary of the FTX meltdown. But for other players who helped promote the cryptocurrency exchange, the legal fallout may continue for years.
“Attention now turns to a sweeping class-action suit in Miami federal court by investors who claim they lost billions in the collapse of FTX and seek to pin blame not just on Bankman-Fried and his inner circle, but also on celebrities who were paid to endorse it to the masses, as well as bankers, accountants and lawyers who propped up the empire’s legitimacy.”
Comedian Larry David and NFL star Tom Brady were among the high-profile names promoting FTX.
“The class action, which seeks to cover hundreds of thousands of investors, alleges that celebrity endorsers and firms that provided financial and legal services to FTX would have seen red flags about the business if they had done proper due diligence. The Miami case seeks unspecified damages for the $8 billion that FTX allegedly ‘stole’ from investors — and most of which ‘vanished’.”
Bankman-Fried having been found guilty does not necessarily mean that celebrities and others should have known about the criminal behavior when they signed on as advisers or brand ambassadors.
But his conviction will benefit the case, according to Daniel Richman, professor at Columbia Law School.
“They ‘are going to benefit mightily from the investigative work of the government’, Richman said. ‘It’s not going to definitely prove their case but helps them considerably in shedding light on what was going on with FTX and Alameda’, the hedge fund affiliated with the exchange that also collapsed in November 2022.”
Celebrities are a prime target for investors looking to recover some of their losses.
But since some of them backed FTX with millions of dollars of their own money, they will argue that they were ‘victims of the criminal enterprise and should not be liable at the civil level’.
Besides celebrities like Brady and David, professional advisers are also listed as defendants, ranging from accounting firm Prager Metis and law firm Fenwick & West to investment firms Sequoia Capital and SoftBank Group.
Takes years to resolve claims against defendants who put up a fight. Investor suits against Bernard Madoff took well over a decade to unfold.
“’This verdict is the beginning of justice for the victims who entrusted their money with FTX and all those who promoted it’, said Adam Moskowitz, an attorney representing the plaintiffs. Lawyers for the defendants didn’t respond to requests for comment.”