Three high-profile endorsers of the failed FTX cryptocurrency exchange – including NFL quarterback Trevor Lawrence – agreed to settle claims they helped dupe investors who lost billions in the meltdown of Sam Bankman-Fried’s digital-asset empire.
(Bloomberg) — Three high-profile endorsers of the failed FTX cryptocurrency exchange – including NFL quarterback Trevor Lawrence – agreed to settle claims they helped dupe investors who lost billions in the meltdown of Sam Bankman-Fried’s digital-asset empire.
The proposed agreements with Lawrence, a star for the Jacksonville Jaguars, and YouTube influencers Kevin Paffrath and Tom Nash were cited in a Friday court filing. The settlement terms weren’t disclosed.
Lawyers say the accords are the first to be reached after more than a dozen celebrities, sports figures and investment fund firms were accused of enabling Bankman-Fried to pull off what prosecutors have called one of the largest frauds in US history. Bankman-Fried is scheduled to go on trial next month in Manhattan on criminal charges and has pleaded not guilty.
Other celebrities who endorsed FTX, including Tom Brady, Gisele Bundchen, Steph Curry, Shaquille O’Neal and Larry David, have also been sued. The class-action suits are before a federal judge in Miami, along with complaints against venture capital and private equity firms including Sequoia Capital and Thoma Bravo that invested in FTX.
Court records show that when FTX was flush, Bankman-Fried spent heavily on endorsements to elevate the profile of his empire using the fame of celebrity athletes, Major League Baseball, National Basketball Association teams and Formula 1 racing. The entrepreneur bought the naming rights to the Miami Heat’s arena and ran a commercial during the 2022 Super Bowl starring David, the comedian who starred in HBO’s Curb Your Enthusiasm.
Lawyers leading the $1 billion case against the endorsers said in Friday’s filing they’re “engaged in ongoing confidential, settlement discussions” with other defendants and there is a “likelihood that other FTX settlements will be reached.”
Investors’ lawyers also said in the filing they want to work with attorneys overseeing FTX’s bankruptcy case to coordinate mediations aimed at settling claims. A trustee gathering FTX assets is studying whether he can claw back millions in payments to professional athlete promoters.
Lawyers for the celebrities have argued the investors have no valid claims against them because the advertisements and sponsorships they were involved with didn’t encourage anyone to actually deposit money in FTX accounts — and because the endorsers had no role at all in alleged losses tied to “FTX’s misappropriation and mismanagement.”
Read More: FTX Investors Go After Brady, Shaq: Here Are Their Legal Chances
Attorneys for Lawrence, Paffrath and Nash didn’t immediately respond after regular business hours to emails seeking comment.
Lawrence, who played for the Clemson Tigers in college and was selected first overall in the 2021 National Football League draft, signed on as an FTX endorser that same year. The exchange said it was the first such deal in which “a significant signing bonus has been paid entirely in cryptocurrency.” An FTX affiliate said in a bankruptcy filing that Lawrence received a $500,000 payment in September 2022.
“Trevor Lawrence is the future of professional football and cryptocurrency is the future of money, so the partnership was a no-brainer,” Bankman-Fried said in 2021.
As a brand ambassador, Lawrence featured in a promotion for FTX’s Blockfolio investment app.
Paffrath, a California-based real estate broker and entrepreneur known as a “landlord influencer,” touted FTX on his YouTube channel “Meet Kevin,” which has more than 1.8 million subscribers, and was paid $2,500 every time he mentioned the platform, according to the investors’ suit.
The Crypto Fraud Case Against Bankman-Fried and FTX: QuickTake
The investors alleged that the FTX endorsements by Paffrath and Nash, an Australia-based influencer with more than 283,000 subscribers to his YouTube page, are “even more dangerous” than network television ads because they can have “outsized influence on their audience.”
FTX imploded in November 2022 after investigations found Bankman-Fried used more than $8 billion in customer deposits as trading capital for his Alameda Research hedge fund. That entity lost billions through risky trades and questionable real estate purchases.
After the collapse, Paffrath and Nash scrubbed their YouTube channels of clips endorsing FTX and substituted video apologies, according to the suit.
The celebrity suits are consolidated in FTX Cryptocurrency Exchange Collapse Litigation, 23-md-03076, US District Court, Southern District of Florida (Miami).
(Updates with excerpts from filing starting in sixth paragraph)
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