Famous backers of the failed crypto exchange FTX, a high-profile list that includes Tom Brady, Steph Curry and Larry David, are being investigated for possible security law violations by a Texas state regulator.
“We’re watching them closely,” said Joe Rotunda, director of compliance for the Texas State Securities Board. Bloomberg News on Monday.
Rotunda told Bloomberg that celebrity endorsements were not the top priority in its state investigation into the FTX collapse, but part of a broader probe into possible violations.
The state regulator said it is investigating what payments famous backers received for promoting FTX, which collapsed into bankruptcy earlier this month, as well as what kinds of disclosures they made.
It is unclear how FTX compensated its various celebrity endorsers, although in some cases it is believed that the company offered equity stakes in exchange for promoting its brand.
FTX founder Sam Bankman-Fried is seen above. The company’s celebrity endorsers are being investigated for possible security law violations by a Texas state regulator.
Tom Brady and his ex-wife Gisele Bundchen are among the celebrities who endorsed FTX
NBA star Steph Curry and comedian Larry David also did business for the cryptocurrency exchange before it crashed earlier this month.
On other recent developments in the FTX collapse:
State-level investigations into violations of securities laws are less high profile than investigations by the US Securities and Exchange Commission, but can result in significant fines.
The SEC is reportedly investigating FTX and the company’s disgraced founder, Sam Bankman-Fried, but it’s unclear if that investigation extends to the company’s celebrity endorsers.
“The SEC does not comment on the existence or non-existence of a possible investigation,” an agency spokesperson told DailyMail.com.
The collapse of FTX, once one of the world’s largest cryptocurrency exchanges, has left an estimated 1 million creditors facing losses totaling billions of dollars.
Joe Rotunda, director of enforcement for the Texas State Securities Board
FTX, which had recently been valued at $32 billion, was backed by a star-studded list of celebrity backers, including some who took equity stakes in the company.
Last week, A-list celebrities who endorsed FTX were named in a class action lawsuit seeking $11 billion in damages.
The lawsuit filed in Florida named Brady, Curry and David, as well as Gisele Bundchen, Shaquille O’Neal, Udonis Haslem, David Ortiz, Trevor Lawrence, Shohei Ohtani, Naomi Osaka and Kevin O’Leary.
It claims that the crypto giant’s founder, 30-year-old Sam Bankman-Fried, and the celebrities he recruited to endorse the company are responsible for around $11 billion in losses to American consumers.
Many of the stars were ‘ambassadors’ for the trading platform, while others appeared in prime time commercials.
The suit, brought by class action lawyer Adam Moskowitz, alleges that they are collectively “responsible for the many billions of dollars in damages they caused Plaintiff.”
Tom Brady and now his ex-wife Gisele Bundchen appeared in an FTX commercial last year. They are named in a class action lawsuit alleging the company’s collapse has cost consumers $11 billion.
Steph Curry’s ad featured him telling viewers: “I’m not an expert and I don’t need to be, with FTX I have everything I need to buy, sell and trade cryptocurrency safely.”
Separately, FTX’s lawyers said Tuesday the company has suffered from cyberattacks and “substantial” assets are missing, after a court filing said the company has a total cash balance of $1.24 billion.
Its cash balance as of Sunday was “substantially higher” than previously thought, according to a Monday presentation by Edgar Mosley of Alvarez & Marshal, a consulting firm that advises FTX.
It includes about $400 million in accounts related to Alameda Research, the crypto trading firm owned by FTX founder Sam Bankman-Fried, and $172 million in FTX’s Japanese division.
FTX, which said on Saturday it has launched a strategic review of its global assets and is preparing to sell or reorganize some businesses, had previously said it owes its 50 largest creditors nearly $3.1 billion.
Reuters has reported that Bankman-Fried secretly used $10 billion in client funds to prop up its trading business and that at least $1 billion of those deposits had vanished.
Details of FTX’s cash balances were released ahead of a hearing in Delaware on FTX’s so-called first-day motions, which began on Tuesday.
A lawyer for FTX told the hearing that the company continues to suffer from cyberattacks as bankruptcy begins and “substantial” assets are missing.
FTX has asked Judge John Dorsey to approve the initial steps of its bankruptcy, including paying critical employees and vendors, which will allow it to continue operating during Chapter 11 bankruptcy proceedings.
FTX, led since the bankruptcy filing by new CEO John Ray, has accused Bankman-Fried of working with Bahamian regulators to “undermine” the US bankruptcy case.
The firm had also asked Dorsey to take on a separate Chapter 15 case filed last week in New York on behalf of FTX’s Bahamas unit by Bahamian court-appointed liquidators. Such procedures are used by foreign companies to seek the cooperation of US courts in cross-border bankruptcy cases.
Lawyers representing the Bahamian liquidators, who previously questioned the validity of US Chapter 11 proceedings and clashed with the team leading it over which case should take precedence, agreed to that lawsuit ahead of the hearing. Tuesday.
FTX, led since the bankruptcy filing by new CEO John Ray, accused Bankman-Fried of working with Bahamian regulators to “undermine” the US bankruptcy case and move assets abroad.
Bankman-Fried, FTX and the Bahamas liquidators did not immediately respond to requests for comment.
FTX is also seeking to compensate unidentified individuals for actions they took and continue to take in connection with assets that represent a significant portion of the company’s equity, according to a court filing on Tuesday.
Sealed claims are unusual at the beginning of a bankruptcy case. FTX said it was reaching out to US regulators and bankruptcy court officials, but did not mention regulators in the Bahamas.
The company said keeping the details of its compensation claim confidential for now could prevent “cyber attacks and other malicious activity.”