By Malathi Nayak, Bloomberg News (via TNS).
Sam Bankman-Fried’s conviction came on the first anniversary of the FTX outbreak. But for others who helped facilitate cryptocurrency trading, the legal consequences will last for years.
Attention now turns to a massive class-action lawsuit filed in Miami federal court, with investors claiming they lost billions as a result of the FTX collapse and seeking to pin the blame not just on Bankman-Fried and his inner circle, but on those who Celebrities who are paid to do so. Recognition to the public as well as bankers, accountants, and lawyers to enhance the legitimacy of the empire.
The slick ads hawking FTX by Larry David and Tom Brady were among the first pieces of evidence shown to the jury at the start of the month-long trial in Manhattan, where the final class Bankman-Fried was found guilty last week of seven counts of fraud and conspiracy.
The class-action lawsuit, which seeks to cover hundreds of thousands of investors, claims celebrity endorsers and companies providing financial and legal services to FTX would have seen red flags in the business if they had done proper due diligence. The Miami case seeks compensation for the $8 billion FTX allegedly “stolen” from investors, much of which “disappeared.”
Bankman-Fried’s guilty verdict does not directly establish the class action lawsuit’s central argument – that dozens of celebrities and other alleged promoters should have known he was up to no good when they signed on as consultants or brand ambassadors.
But Columbia Law School professor Daniel Richman said Damian Williams, the top federal prosecutor in Manhattan, called the 31-year-old’s conviction “the largest financial crime in American history.” One of the fraud cases,” which will add momentum to the investors’ case.
“Benefited a lot”
Richman said they “will benefit greatly from the government’s investigative efforts.” “It doesn’t prove their point for sure, but it helps them understand a lot about what happened with FTX and Alameda,” a hedge fund affiliated with the exchange that also collapsed in November 2022.
Legal experts say the celebrities’ popularity and wealth made them attractive targets for investors seeking to recoup some of their losses, leaving Bankman Fried essentially bankrupt. In past high-profile corporate failures, targeted class actions have resulted in billions of dollars in settlements from banks and other players, including Enron Corp. and WorldCom Corp.
Lawyers for entertainers, sports stars and other celebrities, including Gisele Bundchen, Steph Curry and Shaquille O’Neal, argue that investors have no valid claims against them because the advertising and sponsorships they participate in are not specifically Anyone is encouraged to deposit money in an FTX account. Defense attorneys said in a court filing seeking to dismiss the Miami case that the advocates played no role at all in the alleged losses related to “FTX’s misappropriation and mismanagement.”
“Victims” of crime
Braden Perry said that some of those charged could even use the guilty verdicts to argue that they used millions of dollars of their own funds to support FTX and were “victims of a criminal enterprise and should not be held civilly liable.” Former federal regulatory enforcement attorney and partner at Kenny Hertz Perry LLP.
As for professional advisers, the defendants named in the Miami case range from accounting firm Prager Metis and law firm Fenwick & West to investment firms Sequoia Capital and SoftBank Group. All have denied accusations that they facilitated Bankman-Fried’s deception.
A handful of FTX endorsers have reached settlements with investors, but the terms have not been disclosed, and Bankman-Fried’s conviction may encourage other defendants to reach settlements.
But it could take years to resolve claims against fighting defendants. Investor lawsuits stemming from the massive fraud committed by Bernard Madoff and Alan Stanford have raged for more than a decade.
“The Madoff case in particular is unprecedented in scope and complexity, and the civil litigation surrounding it has been extensive and continued for many years,” Perry said. “With the involvement of multiple jurisdictions and the lack of a regulatory structure, FTX’s Probably more complex than Madoff.”
Bankman-Fried and three of his fellow executives who pleaded guilty and testified against him could be ordered to pay some or all of the billions of dollars in criminal cases as victim restitution.
regulatory litigation
On the civil front, in addition to the Miami case, Bankman-Fried faces pending litigation from the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission. He has also been the target of cases brought by FTX and the Alameda bankruptcy trustee.
Joshua Naftalis, a former federal prosecutor and a partner at the law firm Pallas Partners, said he expected the civil case to “draw on for a long time, as usually happens when there are parallel criminal cases The situation is the same.”
“I suspect the SBF will resolve the civil cases quickly as he will focus on criminal appeals,” he said.
Bankman-Fried’s sentencing has been scheduled for March. A hearing date has not yet been set on the defendants’ request in Miami to dismiss the FTX investors’ case.
Adam Moskowitz, an attorney for the plaintiffs, said: “This verdict is the beginning of justice for the victims who entrusted their funds to FTX and for all those who promoted FTX.” Lawyers for the defendants did not respond to requests for comment.
These civil actions are consolidated in the FTX Cryptocurrency Exchange Crash Litigation, 23-md-03076, United States District Court, Southern District of Florida (Miami).
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