A new class action lawsuit has been filed against FTX Exchange, a once-thriving cryptocurrency dealer whose name is prominently displayed on the arena where the Miami Heat play. FTX's fall from grace is rapidly accelerating.
The $11 Billion class action complaint names 11 of FTX Exchange's high-profile advertisers, including football great Tom Brady and his ex-wife, supermodel Gisele Bundchen, as well as NBA veteran and former Heat player Shaquille O'Neal.
The civil case that was submitted to the federal court in Miami is by no means the only legal challenge that the firm located in the Bahamas has. The company's decision to file for bankruptcy has shaken the markets for cryptocurrencies.
The company is not only being investigated for suspected breaches of securities laws at the federal level but also at the state and local levels. A maelstrom of legal activity, including this potential FTX open class action is circling the wagons of FTX's aftershock.
What Happened to FTX?
The Bahamas-based FTX is a digital currency exchange. Users are able to purchase, sell, hold, and trade cryptocurrencies on the platform, which was established in 2019 by Sam Bankman-Fried, or SBF, as he is now known infamously (although these capabilities are now unavailable owing to the failure of the company).
During its very recentheyday, FTX invested its capital in a variety of sponsorship arrangements. During the time that the FTX Arena was being constructed for the Miami Heat, the firm also secured a sponsorship contract with the Mercedes-Benz Formula One team and became the title sponsor of the professional e-sports organization Team SoloMid (TSM), which was known as TSM FTX for a period of time.
The Massive, Unfolding Decline of FTX
Let's go back in time for a moment before we discuss the decline of FTX. This year has proven to be difficult for the cryptocurrency sector as a whole due to a variety of factors.
The unstable state of the economy, along with the failure of the Terra protocol, which was the driving force behind the TerraUSD stablecoin and its sister token Luna, triggered a domino effect that resulted in the failure of a number of additional businesses throughout the course of 2022.
This "crypto winter" ultimately resulted in a number of businesses, including Celsius, Three Arrows Capital, and Voyager Digital, declaring bankruptcy throughout the course of the summer.
Even while things were still looking well for FTX at this time, and in fact, Bankman-Fried burnished his name by openly seeking to bail out other failing crypto enterprises, this didn't last very long. Things didn't stay this way for very long!
When did FTX file for bankruptcy?
The 11th of November saw the filing of Chapter 11 bankruptcy petitions by FTX and Alameda Research, as well as the resignation of Bankman-Fried from his position as CEO of both companies.
The petition exposes a number of problems inside FTX, including the fact that it may not even have verified the number of users on its platform and may not have an exact list of bank accounts and account signatories, both of which are quite terrible.
John J. Ray III, who is the new CEO of FTX and who was also brought in to restructure Enron after that business collapsed, states in the document that he has never seen such a catastrophic breakdown of corporate controls and such a complete lack of trustworthy financial information as happened here.
FTX Class Action Take Away
The legal case is requesting from the Court to be designated as a class action lawsuit so that it may represent all FTX investors that suffered the same sort of damages. Sam Bankman-Fried, an MIT graduate and funds trader, is the primary defendant listed in the lawsuit, along with A-List celebrity endorsers, whom the plaintiff (or the class action lead plaintiff) is also seeking compensation for damages from over a dozen celebrity marketers.
In the lawsuit that was brought against them by lawyers Adam Moskowitz and David Boies, it is alleged that the defendants participated in misleading business practices in order to offer FTX yield-bearing digital currency accounts. They lied to consumers and gambled away consumer funds that otherwise should have sat in digital accounts, the (soon-to-be) class action lawsuit alleges.
How Do I Find Class Action Settlements?
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