The celebrity endorsers of failed crypto exchange — a high-profile roster including , Steph Curry, and Larry David — are under investigation for potential security law violations by a state regulator.
‘We are taking a close look at them,’ Joe Rotunda, director of enforcement at the Texas State Securities Board, told on Monday.
Rotunda told Bloomberg that celebrity endorsements were not the top priority in his state probe of FTX’s collapse, but were part of a broader investigation into potential violations.
The state regulator said he is investigating what payments the celebrity endorsers received for touting FTX, which collapsed in bankruptcy earlier this month, as well as what kind of disclosures they made.
It’s unclear how FTX compensated its various celebrity endorsers, though in some cases the company is believed to have offered equity stakes in exchange for promoting its brand.
FTX founder Sam Bankman-Fried is seen above. The company’s celebrity endorsers are under investigation for potential 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 commercials for the crypto exchange before it imploded earlier this month
In other recent developments in the collapse of FTX:
- Sam for the first time since FTX went under
- Records revealed worth of property in the Bahamas
- US prosecutors reportedly into FTX months ago
- Bankman-Fried’s interviews pose risks to his defense
State-level probes into violations of securities laws are less high-profile than investigations by the US Securities and Exchange Commission, but can result in hefty fines.
The SEC is reportedly investigating FTX and the company’s disgraced founder, Sam Bankman-Fried, but it’s unclear whether that probe extends to the company’s celebrity endorsers.
‘The SEC does not comment on the existence or nonexistence 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 at the Texas State Securities Board
FTX, which had recently been valued as high as $32 billion, was backed by a star-studded roster of celebrity endorsers, including some who took equity stakes in the company.
Last week, the A-list celebrities who endorsed FTX were named in a class-action lawsuit claiming $11 billion in damages.
The suit 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 crypto giant founder, Sam Bankman-Fried, 30, and the celebrities he recruited to endorse the firm are responsible for around $11 billion of losses to American consumers.
Many of the stars were ‘ambassadors’ for the trading platform, while others appeared in prime-time commercials.
The suit, filed by class action attorney Adam Moskowitz, alleges they are collectively ‘responsible for the many billions of dollars in damages they caused Plaintiff’.
Tom Brady and now ex-wife Gisele Bundchen appeared in an FTX commercial last year. They’re named in a class action lawsuit which alleges the firm’s collapse has cost consumers $11 billion
Steph Curry’s advert showed 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 crypto safely.’
Separately, attorneys for FTX said Tuesday the company has suffered cyberattacks and ‘substantial’ assets are missing, after a court filing said the firm has a total cash balance of $1.24 billion.
Its cash balance as of Sunday was ‘substantially higher’ than previously thought, Monday’s filing by Edgar Mosley of Alvarez & Marshal, a consultancy firm advising FTX, said.
It includes around $400 million in accounts related to Alameda Research, the crypto trading firm owned by FTX founder Sam Bankman-Fried, and $172 million at FTX’s Japan arm.
FTX, which said on Saturday it has launched a strategic review of its global assets and is preparing for the sale or reorganization of some businesses, had previously said that it owes its 50 biggest creditors nearly $3.1 billion.
Reuters has reported Bankman-Fried secretly used $10 billion in customer funds to prop up his trading business, and that at least $1 billion of those deposits had vanished.
The details of FTX’s cash balances came ahead of a hearing in Delaware on FTX’s so-called first-day motions, which kicked off on Tuesday.
An attorney for FTX said at the hearing that the company continues to suffer cyberattacks as bankruptcy begins, and that ‘substantial’ assets are missing.
FTX has asked Judge John Dorsey to sign off on initial steps in its bankruptcy, including paying employees and critical 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 U.S. bankruptcy case
The firm had also asked Dorsey to take over a separate Chapter 15 case filed last week in New York on behalf of FTX’s Bahamas unit by liquidators appointed by a Bahamas court. Such proceedings are used by foreign companies to seek U.S. courts’ cooperation in cross-border bankruptcy cases.
Lawyers representing the Bahamian liquidators, who have previously questioned the validity of the U.S. Chapter 11 proceedings and clashed with the team leading it over which case should take precedence, agreed to that demand before Tuesday’s hearing.
FTX, led since the bankruptcy filing by new CEO John Ray, has accused Bankman-Fried of working with Bahamian regulators to ‘undermine’ the U.S. bankruptcy case and shift assets overseas.
Bankman-Fried, FTX and the Bahamas liquidators did not immediately respond to requests for comment.
FTX is also seeking to indemnify unidentified individuals for actions they took and continue to take in connection with assets that represent a significant share of the company’s estate, according to a Tuesday court filing.
Sealed indemnification requests are unusual at the start of a bankruptcy case. FTX said that it was communicating with U.S. regulators and bankruptcy court officials, but did not mention Bahamas regulators.
The company said that keeping details of its indemnification request confidential for now could ward off ‘cyber-attacks and other malicious activity.’