Many Exchanges Are "Secretly Insolvent," According To Ftx Chief

Former FTX Executive Shares Evidence Against Promoters

  • The suit was filed days after FTX filed for bankruptcy following a liquidity crisis.
  • Some of the promoters include Gisele Bündchen, Tom Brady’s ex-wife, businessman Kevin O’Leary, basketball player Steph Curry, and the Golden State Warriors.
  • The class action attorneys are attempting to address the defendants’ jurisdictional objections by amending their case with the new information.

A former executive of the crypto exchange FTX has agreed to cooperate in a class action lawsuit against celebrities who are accused of endorsing the now-bankrupt exchange. Daniel Friedberg, who served as a Chief Compliance Officer at FTX US, presented proof that FTX promotional activity commenced in Florida, which could change the direction of the case.

Friedberg’s declarations, which he gave “under penalty of perjury,” could disprove a crucial defense offered by a few of the defendants, who argued that the Miami court lacks jurisdiction and that the allegations had no connection to Florida.

An amended complaint, which was filed in a Florida District Court on Thursday, May 11, claims that FTX US’ vice president of business development, Avinash “Avi” Dabir, was operating out of an FTX office in Miami “early in 2021” and was tasked with handling FTX’s brand ambassadors.

The class action attorneys believe the new revelation disproves the points raised by the defendants in their petitions to dismiss. Some of the defendants claimed that “no conspiracy could have been ‘engineered in Florida’ because FTX did not even plan to move to Miami until late September 2022,” which was before they endorsed the exchange.

At its peak, FTX employed the services of several high-profile US celebrities across sports and music. Some of the prominent names include basketball legend Shaquille O’Neal, former NFL star Tom Brady, lawn tennis star Naomi Osaka, and comedian Larry David.

Plaintiffs demand billions in compensation

Plaintiffs in the class action case argue that FTX paid its brand ambassadors to unlawfully promote interest-bearing accounts that were essentially securities and failed to register these accounts with the U.S. Securities and Exchange Commission (SEC) as mandated.

The plaintiffs contend that under Florida state law, anybody who advertises unregistered securities is accountable for any losses that investors incur as a result of holding the investment, such as a decline in the value of a portfolio comprising various digital coins that underperformed. The complaint demands billions of dollars in damages from all parties.

Defense attorneys previously called for dismissal of the case, arguing that their clients’ commercials for FTX never mentioned the unregistered securities accounts but only made positive statements about the exchange.

The court will decide if the updated information is enough to establish jurisdiction.

Lawrence Woriji Verified

Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.

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