Re: 12/12/2022 - NY Times / The Athletic -- Tom Brady, David Ortiz sued again over FTX endorsements
Tom Brady, David Ortiz sued again over FTX endorsements
By Daniel Kaplan
Dec 12, 2022
Cryptocurrency investors last week filed a lawsuit in Florida state court against Tom Brady, accusing the Buccaneers quarterback and baseball Hall of Famer David Ortiz of duping consumers when they backed now bankrupt digital money platform FTX. The lawsuit also named former FTX executives.
The litigation joins a similar federal lawsuit against several athletes who endorsed FTX, including Brady and Ortiz, and a different one aimed at Mark Cuban and the Dallas Mavericks for alleged transgressions related to the team’s sponsorship deal with failed crypto firm Voyager.
These lawsuits raise the question of what culpability celebrity endorsers have for touting a financial product that fails. Could Brady and his peers actually be on the hook for losses as the cryptocurrency ecosystem appears to implode?
Certainly not if a ruling in a case brought against Floyd Mayweather, Kim Kardashian and basketball Hall of Famer Paul Pierce is any indication. In dismissing a lawsuit alleging their promotion of failed cryptocurrency Ethereum Max was a fraud, federal judge Michael Fitzgerald wrote last week, “The Court acknowledges that this action raises legitimate concerns over celebrities’ ability to readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach. But, while the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.” He is allowing the plaintiffs to refile the case.
The Ethereum class action is focused on different charges — racketeering and fraud — than the Brady cases, which is based in part on Florida consumer protection statutes and federal securities law. It is a point emphasized by Adam Moskowitz, a lawyer for one of the law firms representing plaintiffs in both the federal and state cases against Brady and other athletes, as well as the Voyager litigation.
“That proposed RICO complaint really has no similarities to our cases at all, in terms of the specific claims, the specific allegations or any of the applicable law,” Moskowitz wrote in an email, referring to the Racketeering Influenced and Corrupt Organizations (RICO) charge in the Ethereum case. “The only aspect that is similar is that they also sued a few of the cryptocurrency promoters for other claims, but specifically not for promoting the sale of unregistered securities.”
Dan Wallach, a sports attorney who is following these cases closely, agreed the charges in the Brady and Ethereum cases are not the same, but noted that Judge Fitzgerald’s admonition that investors act reasonably would likely be cited by the defense in the Brady cases.
Overall, the defense should have a strong case, he said, because the plaintiffs would have to prove not only that athletes were directly tied to selling actual securities, but that the investor losses were directly attributable to the commercials and promotions of the athletes.
“How can you prove that every member of the class bought the security, invested in FTX and made deposits based upon every one of those advertisements?” Wallach said. “Did (Ortiz’s) commercial from the 2021 World Series induce everybody who’s a member of the class to buy the security?”
Darren Heitner represents NASCAR Xfinity Series driver Brandon Brown, who is being sued for promoting the LGB token (named after the political slogan “Let’s Go, Brandon”). Heitner agreed with Wallach that Judge Fitzgerald’s arguments should carry great weight across all these cases, whether they are based on the same legal theories or not.
“To some extent, you have to place blame on the consumer and not point the finger at the promoters,” Heitner said.
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Brady is arguably FTX’s most famous endorser, appearing in ads with his then-wife, supermodel Gisele Bundchen, and investing in the company. His Twitter profile featuring a headshot with gleaming eyes was a signal of crypto enthusiasm. He has since replaced that profile picture.
“It’s an incredibly exciting time in the crypto-world and Sam and the revolutionary FTX team continue to open my eyes to the endless possibilities,” Brady said in a press release last year, referring to FTX founder Sam Bankman-Fried. “This particular opportunity showed us the importance of educating people about the power of crypto while simultaneously giving back to our communities and planet. We have the chance to create something really special here, and I can’t wait to see what we’re able to do together.”
In the federal case, Brady is joined by a host of other FTX endorsers, including Naomi Osaka, Stephen Curry, Shaquille O’Neal and Shohei Ohtani. The Florida state action targets Brady, Ortiz and “Shark Tank” regular Kevin O’Leary because they reside in the state.
“Part of the scheme employed by the FTX Entities involved utilizing some of the biggest names in sports and entertainment — like these Defendants — to raise funds and drive American consumers to invest in the YBAs,” the Florida lawsuit charged, referring to the yield-bearing accounts FTX customers received when signing up. “FTX Entities needed celebrities like Defendants to continue funneling investors into the FTX Ponzi scheme.”
Moskowitz in an email added, “We respectfully asked (the court) to decide, on an expedited basis … have the three Florida FTX Brand Ambassadors (Tom Brady, Kevin O’Leary and David Ortiz) violated the FTC, SEC and Florida state consumer laws, specifically on touting and promoting these cryptocurrency products (whether they are ‘securities’ or not), without adequate disclosures?”
Heitner said if the case is not dismissed, Brady will be subject to discovery looking at what diligence he performed to measure the risk in promoting FTX. “Plaintiffs will make every effort possible to keep those promoters in because it continues to keep notoriety surrounding the case,” Heitner said. “And, you know, these individuals have deep pockets and are likely more collectible than the crypto entity itself.”
A representative for Brady did not reply for comment.
(Top photo: Thearon W. Henderson / Getty Images)
 
Daniel Kaplan spent 21 years at SportsBusiness Journal, helping create before the magazine even launched the leading industry publication for sports business news. He left in May 2019 to join The Athletic. He writes primarily for the NFL vertical but also contributes stories in other sports. Follow Daniel on Twitter @KaplanSportsBiz
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