Major League Baseball (MLB), the Mercedes-Benz Formula One Team, global sports and media agency Wasserman Media Group and talent management and digital ad network DentsuMB face proposed class action lawsuits over their alleged participation in the historic fraud perpetrated by the now-collapsed FTX cryptocurrency exchange.
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The three cases, filed in Florida federal court on November 27, ring similar in alleging that the massive FTX fraud—reportedly the largest financial fraud in history—was made possible with the “willing help and assistance of some of the wealthiest, most powerful and recognized organizations and celebrities” in the world. Essentially, the promotional narrative crafted by MLB, Mercedes F1, the media companies, and myriad celebrity influencers misled the public to believe that the FTX platform and its product offerings were safe and protected, the filings claim.
“For that Defendants are liable for Plaintiffs’ losses, jointly and severally and to the same extent as if they were themselves the FTX Group,” the lawsuits summarize.
The suits contend that recent clarifications of federal securities law have given FTX investors an avenue with which to sue crypto-promoters such as the defendants, who the lawsuit says were significantly involved in and compensated handsomely for hyping and disseminating FTX’s many promotions of its native FTT token and yield-bearing accounts, which are essentially unregistered securities.
“Defendants’ conduct … led to significant legal and financial repercussions—not only is there binding precedent that Defendants’ widespread promotion of FTX’s unregistered securities render them liable for any and all resulting damages, but as the FTX bankruptcy and criminal proceedings against its executives demonstrate, losses to the victims now exceed $11 billion,” the lawsuit against Wasserman Media Group and DentsuMB, who provided FTX with “creative, talent, partnership management, and partnership performance services,” says. “This lawsuit seeks to hold Defendants liable under the law.”
The case against MLB says that amid the COVID-19 pandemic, the league had to decide whether to emulate the National Football League’s “cautious approach” toward becoming involved in cryptocurrency or go “all in” and endorse and align itself with FTX, “a move aimed at catapulting them to the forefront of the cryptocurrency arena.” As a result of MLB’s risky embrace of FTX and the larger crypto industry, victims of the FTX collapse and subsequent bankruptcy have lost billions, the filing states.
The suit against Mercedes F1 also says that the team must now lie in the bed it made with the defunct cryptocurrency exchange. As the case tells it, Mercedes F1, though paid handsomely to push FTX’s brand, “did not conduct adequate (if any) due diligence” before partnering with the financially fragile exchange.
“Unfortunately for Mercedes F1, under binding law, anyone that mass promotes products FTX’s [sic] can be sued for any and all resulting damages. This law was updated for today’s technology so that a promoter like Mercedes F1 can be held liable under securities laws for using the Internet and social media for mass solicitations of crypto-related securities, whether for their own or the securities issuer (FTX Group)’s gain. The law now recognizes that the Internet, social media, and other new platforms have given promoters an incredible new outlet to aid and participate in selling fraudulent investments to investors across the globe.”
The lawsuits look to cover all persons or entities who, within the applicable statute of limitations period, bought or held legal title to and/or beneficial interest in any fiat or cryptocurrency deposited or invested through an FTX platform, purchased or enrolled in a yield-bearing account or purchased FTX’s native FTT token.
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