A former compliance chief of FTX, Daniel Friedberg, has provided evidence to support a class-action lawsuit against celebrities who allegedly promoted the now-defunct FTX exchange. Friedberg’s testimony indicates that promotional activity for FTX originated from Florida, which could potentially refute claims that the Miami court has no jurisdiction and the claims have no association with Florida.
Friedberg stated that the exchange’s US arm’s vice president of business development, Avinash “Avi” Dabir, was based in Miami and was in charge of brand ambassadors for FTX, including defendants in the case. The class-action lawyers plan to use this evidence to address the jurisdictional claims by the suit’s defendants.
The lawsuit was first filed in November 2021, after the exchange’s collapse, and alleged celebrity promoters include Shaquille O’Neal, Larry David, Tom Brady, and Sam Bankman-Fried. Friedberg was also named as a defendant in an amended complaint on December 16, and he reportedly provided details about FTX to investigators from the New York District Attorney, the Justice Department, the Federal Bureau of Investigation, and the Securities and Exchange Commission after the exchange’s collapse.
FTX troubles
FTX was a cryptocurrency exchange that was launched in 2019 and was backed by major investors such as Binance, Coinbase Ventures, and Digital Currency Group. The exchange was known for its high trading volumes and innovative products such as leveraged tokens, futures, and options. However, FTX faced a significant setback in May 2021, when it was hit by a major sell-off in the cryptocurrency market, which caused its trading volumes to plummet and its users to lose millions of dollars.
FTX’s troubles deepened in June 2021 when it was hit by a class-action lawsuit alleging that the exchange had engaged in market manipulation and fraud. The lawsuit, which was filed by traders who had suffered losses on the exchange, claimed that FTX had created fake orders and inflated its trading volumes to attract more users and revenue. The lawsuit also alleged that FTX had failed to disclose its affiliation with Alameda Research, a trading firm that had been accused of engaging in insider trading and wash trading.
Role of celebrity endorsements in promoting digital assets
FTX denied the allegations and vowed to defend itself vigorously. The exchange also announced that it had hired a prominent law firm to represent it in the lawsuit and that it was cooperating with regulators to address any concerns they may have had. However, FTX’s troubles continued to mount, and in November 2021, the exchange filed for bankruptcy, citing mounting legal costs and a lack of liquidity.
The collapse of FTX was a significant blow to the cryptocurrency industry, as the exchange had been seen as a rising star and a potential challenger to established players such as Binance and Coinbase. The fallout from the collapse also raised questions about the regulation of the cryptocurrency industry and the role of celebrity endorsements in promoting digital assets. The class-action lawsuit against the exchange and its alleged celebrity promoters is likely to be closely watched by investors and regulators alike as they seek to understand the risks and opportunities of the emerging crypto market.
