An Oklahoma cryptocurrency investor has sued the founder of FTX and its celebrity ambassadors, including Tom Brady and David Ortiz, alleging the now-bankrupt digital currency exchange was effectively “a Ponzi scheme” that used deceptive practices to bilk investors.
The proposed class action lawsuit, filed Tuesday in federal court in Florida by Edwin Garrison, names the two former Boston athletes, FTX founder Sam Bankman-Fried, and several other celebrity endorsers as defendants.
In the 41-page civil complaint, lawyers for Garrison said he is filing the suit on behalf of himself and “all others similarly situated,” noting that American consumers collectively lost more than $11 billion as a result of the FTX collapse.
Garrison purchased “an unregistered security” from FTX in the form of a yield-bearing account, “after being exposed to some or all of Defendants’ misrepresentations and omissions” about the FTX platform, the complaint states.
The exchange used “some of the biggest names in sports and entertainment — like these Defendants — to raise funds and drive American consumers to invest” in such accounts, the complaint said.
While commercials those celebrities appeared in touted FTX’s financial health, the complaint alleges, a recent Reuters report indicates that Bankman-Fried secretly transferred at least $4 billion in customer funds to an affiliated company, Alameda, and that FTX entities overall lent more than $10 billion in customer funds to Alameda.
Bankman-Fried resigned from FTX Friday as it filed for bankruptcy, and government regulators launched investigations when a run on deposits left the company with an $8 billion shortfall, the New York Times reported.
FTX and its related businesses could owe money to more than 1 million people and organizations, lawyers wrote in filings on Monday, the Times reported.
Garrison’s lawsuit says FTX celebrity endorsers “never disclosed the nature, scope, and amount of compensation they personally received in exchange for the promotion of the Deceptive FTX Platform, which the SEC has explained that a failure to disclose this information would be a violation of the anti-touting provisions of the federal securities laws.”
In addition, the endorsers failed to conduct “any due diligence prior to marketing these FTX products to the public,” the suit alleged.
Requests for comment were sent Wednesday to Brady’s agent and a spokesperson for Ortiz.
The lawsuit provides a rundown of FTX commercials featuring the celebrities, including those featuring Ortiz, Brady, and Brady’s former wife, supermodel Gisele Bündchen.
“Mr. Brady and Ms. Bündchen also joined the company’s $20-million ad campaign in 2021,” the complaint said. “They filmed a commercial called ‘FTX. You In?’ showing them telling acquaintances to join the FTX platform.”
The suit seeks unspecified financial damages.
Lawyers for the defendants hadn’t filed a response to the lawsuit as of Wednesday afternoon.