Formula 1 is among four new defendants in a lawsuit related to the marketing of crypto exchanges FTX and Binance.
The courtroom team that’s seeking billions of dollars in damages from three dozen celebrities for unlawfully promoting failed crypto exchange FTX and struggling rival Binance just added four famous new targets to their attack. On Nov. 27, Miami class action specialist Adam Moskowitz, who helped win a huge settlement in the Surfside tower collapse in Florida, filed a total of four class action lawsuits. Three of the salvos take aim at organizations that boosted FTX: Major League Baseball; Formula 1 and Mercedes-Benz, sponsor of its signature racing team; and as dual defendants, ad giant Dentsu and global talent agency Wasserman. The fourth defendant is soccer legend Cristiano Ronaldo, a onetime worldwide pitchperson for Binance.
In an exclusive interview with Fortune, Moskowitz explained the rationale behind the fresh onslaught, and the highly significant legal rulings that led to greatly expanding the field of defendants. Moskowitz, as well as legal legend David Boies, have already filed three active cases against celebrities and billionaires for touting tokens and accounts at digital exchanges. The big names in those actions range from sports stars Tom Brady and Steph Curry as FTX brand ambassadors, to Binance founder Changpeng Zhao, to Mark Cuban, whose NBA Mavericks forged a promotional deal with Voyager, to Rob Gronkowski, who also did promos for the bankrupt exchange.
“I always believed we had the law on our side in all those cases,” says Moskowitz. “But when we brought the Voyager and Cuban action [in 2022], the law wasn’t settled.” A 2019 decision held that an investor who lost money on a dicey investment could only collect damages from the promoter if that promoter directly and personally solicited their business in a letter or email. But if the pitch came over the internet on YouTube or Instagram, they may have no recourse.
Moskowitz says he forged ahead with the celebrity suits, believing that the 2019 decision contradicted the spirit of the Securities Act of 1933, and would be overturned. In early 2022, the 11th Circuit Court of Appeals governing Alabama, Georgia, and Florida upended the “only liable if the pitch was direct” ruling. In September, the Ninth Circuit Court of Appeals covering California and Arizona confirmed the 11th decision, stating that, correctly interpreted, the Securities Act required that promoters using the internet or any other mass media were liable for their customers’ losses, if they provide misleading information. In their opinions, the judges found it appalling that promoters who had caused grave harm would pretty much get away with anything under the old rules. “Those two decisions were game changers,” says Moskowitz. “They updated the laws for the internet age.”
Moskowitz stresses that he’s suing under a law that enjoys a special, extremely punitive status: penalties for the promotion of unregistered securities. “Under that law, if the product is found to be an unregistered security and if the promoter had a financial interest, they’re liable regardless of what words they selected in their promotion. Interestingly, all of these promotions were carefully drafted by the world’s best ad agencies. And the audience metrics were outstanding,” says Moskowitz. The SEC judges digital coins and earn programs to be unregistered securities. Now that the law clearly states that promoters on social media are liable for clients’ losses, Moskowitz believes his celebrity suits enjoy a solid legal basis.
It was the mass media decision that encouraged Moskowitz to launch the four new actions in federal court for Southern Florida, as well as obtain important information from cooperating defendants. The MLB suit claims that FTX paid the league for ads during game broadcasts and promos for home run derbys, and the umpires for wearing the FTX logo on their uniforms. “You have to remember that MLB was in a dire economic state during the COVID crisis, with no idea how long the stadiums would remain empty, so they decided to take the risk of doing a deal with FTX. It appears that the NFL was much more prudent and didn’t risk partnering with FTX,” adds Moskowitz. It’s unknown how much FTX paid MLB. But Moskowitz expects that the number will emerge in discovery.
“The current estimate in the bankruptcy court puts the total losses for FTX investors alone at $11 billion,” concludes Moskowitz. “The Binance losses may add more billions to the total.” He’s encouraged that the DOJ-Binance settlement allows the world’s largest exchange to keep operating, increasing the chances of getting money for the victims. As for bankrupt FTX, Moskowitz deems that the success of his team’s action may provide the only possible avenue for investors to recover a significant portion of their investments.
“We’re just trying to [get] something back for the victims who’ve so far recovered pennies,” says Moskowitz. He adds that his investigations team will continue to examine the role of every professional large or small who played a role in serial disasters. He’s aiming high to be sure. Winning for investors would prove an epic victory for accountability in a business racked by fraud.
Credit: Source link