While roaming off the soccer field, Tom Brady makes his home for the FTX cryptocurrency trading platform.

“It’s better,” said the esteemed quarterback He says As he reviews an investment portfolio looking skyward on his phone. “I like better.”

The ad posted on FTX’s Instagram account in September, has not been It’s the first time Brady has thrown his massive weight behind a tech company — but it was likely the last.

After a month and a half, the balance sheet leaked From Alameda Research, a trading firm co-founded by former FTX CEO Sam Bankman-Fried, it led to a crash of epic proportions.

FTX is now based in the Bahamas bustyand Bankman-Fried sits in Palo Alto under house arrest As faces fraud charges. Some of the alien world’s closest associates turned against him; begged Not guilty.

If Brady hadn’t been completely caught up in the meltdown, he wouldn’t have come out completely unscathed, either. The professional athlete is among several celebrities being sued in a class action alleging they helped promote the sale of unregistered securities in the form of yielding FTX accounts.

The lawsuit, filed in Miami, highlighted the important role played by high-profile athletes, actors, and other entertainers in promoting FTX. Although some legal experts believe it will be difficult to prove liability, the federal case forces a reconsideration of how celebrities interact with the controversial cryptocurrency industry.

“It is clear that FTX’s paid validator program is designed to use the positive reputation associated with specific celebrities to convince consumers that FTX is a safe place to buy and sell cryptocurrency,” the lawsuit says. “Celebrities have a moral and legal obligation to know that what they are promoting is not likely to cause physical or financial harm to customers.”

Ahead of its extraordinary implosion, FTX pulled together a red carpet of celebrity sponsors, bringing glamor and glamor to the ill-fated House of Cards.

Larry David starred In an FTX Super Bowl ad that positioned cryptocurrency as a world-historic innovation on par with the wheel or the flashlight.

Shaquille O’Neal Requested Potential investors: “I’m in. Are you?”

Other Familiar Names – Steve Curry, David Ortiz, Shuhei Ohtani, Naomi Osaka, Kevin “Mr. Brilliant” O’Leary – also promoted the company. All defendants are listed.

“It’s a warning to these celebrities,” said Adam Moskovitz, one of the attorneys filing the lawsuit. “If you are going to take a risk, there will be consequences.”

An attorney representing Brady and David declined to comment. Representatives for O’Neal, Curry, Ortiz, Otani, Osaka and O’Leary did not respond to requests for comment. O’Neal has far himself from the company, framing his role as a “paid spokesperson”. O’Leary, known for his role as a celebrity investor on “Shark Tank,” told CNBC’s “Squawk Box” that Involvement With FTX it was the result of “group thinking”.

In addition to any permanent reputational damage, Brady and his ex-wife, model Gisele Bundchen, will likely be involved Lost Most or all of the significant financial stake they own in FTX.

The crypto space has always been awash with A-listers. Matt Damon, LeBron James, Reese Witherspoon, Snoop Dogg, Steve Aoki, and Steven Seagal have all promoted various crypto products. A year ago, Jimmy Fallon and Paris Hilton were in an awkward position Schlid Non-fungible tokens, a specific class of cryptocurrency, on “The Tonight Show”. Cryptocurrency trading is unique prominently In a 2021 music video posted by Post Malone and The Weeknd.

And with celebrities comes celebrity scandals, especially in an industry as unregulated as cryptocurrency. The Securities and Exchange Commission charged Floyd Mayweather Jr. and DJ Khaled in 2018 with failing to disclose that they were paid to promote crypto tokens; Kim kardashian She met a similar fate in October. (At the time, Kardashian’s lawyers said the socialite fully cooperated and was pleased to solve this issue.)

FTX’s downfall has affected others in the entertainment industry, including former CAA agent Michael Kives, whose fund earned $300 million. investment From Bankman-Fried, according to the info. The former CEO reportedly wanted to sign A.J financing deal With the never-fulfilling power of Taylor Swift’s music.

It’s no accident that Hollywood’s star power frequently overlaps with what is otherwise a fairly niche financial vehicle, experts say.

“Celebrity endorsements have been extremely important to cryptocurrency for a very long time,” said Yesha Yadav, associate dean at Vanderbilt Law School whose work focuses on securities regulation. The sector has “relied on celebrities to popularize it; on celebrities to use their existing social networks, credibility and reputation to drive an asset class that many people were unfamiliar with.”

“They’re really using celebrity as a tool to convince unsuspecting consumers to invest,” said Bonnie Batten, executive director of consumer watchdog group Truth in Advertising.

Moskovitz, the attorney behind the class action lawsuit, said he has been following cryptocurrency fraud cases for a while: first with low-level scammers, like a Kazakh teenager, and then around more formal crypto platforms over the past two years.

Now the lawyer wants to hold several of the celebrities he says have allowed Bankman-Fried to be held accountable. Pursuing celebrity sponsors provides a faster path toward recouping what FTX victims owe, Moskovitz told The Times, rather than trying to get money from an embattled Bankman-Fried and his fractured empire.

“We have people who have lost millions of dollars … because they were told at 8% interest that this was the safest investment,” said Moskovitz, who claims some of his clients lost their savings after being persuaded by celebrity FTX sponsors. A safe place to park their money.

He added, “People respect celebrities.” “Right or wrong, people respect them, and you kind of get acceptance in the community” by enlisting them as sponsors.

was established In 2019 and worth $18 billion by 2021, FTX was a poster child for the cryptocurrency industry in part because Bankman-Fried proactively nurtured political connections, including via campaign Donations, and sought to create an aura of respectability that is lacking in most of the cryptocurrency industry – riddled with fraud and price swings. This summer, with the sector suffering, FTX made buyout and acquisition bids for other crypto companies, even when ordered by Federal Deposit Insurance Corp. Stop suggesting That cryptocurrency investments were backed by the government.

The company’s reputation really began to unravel in November with the leak of Alameda Research’s balance sheet, setting off a domino chain reaction that led to bankruptcy, house arrest, and Moskowitz’s class action lawsuit.

In addition to this case, the attorney is also pursuing a case in Florida State Court v. Brady, Ortiz, and O’Leary, which he hopes will lead to a ruling on whether interest-bearing FTX accounts constitute unregistered securities.

For Moskowitz, this question is straightforward: “These are unregistered securities, you promoted them, and you are responsible.”

But others aren’t so sure.

“We don’t know if these things will eventually be considered securities,” said Sheila Warren, CEO of the Crypto Council for Innovation trade group. There is a strong argument that they are not at all like that and never have been; There is an argument that they start out as stocks. … All these arguments are there, and they are unresolved.”

“Our regulatory framework for the broader cryptocurrency market hasn’t really caught up,” said Yadav, associate dean for Vanderbilt Law. “When we talk about certain financial institutions like FTX that deal in tokens, because the tokens themselves don’t have any consensus about what they are legally, the institutions they deal with don’t either.”

Yadav added that it is unlikely that the court will issue a regulatory issuance for cryptocurrency on its own; What’s more conceivable is that some of the celebrities named in the lawsuit chose to settle the case to protect their reputations.

Class action cases are hard to win, Truth in Advertising’s Patten said, and it won’t be easy to prove that the celebrity sponsors named in this case caused investors harm.

“I wouldn’t bet on the consumer side,” she said.

Regardless, the reputational damage from FTX’s implosion may be more daunting for celebrity affiliates than any dollar amount. Brady and the rest lent their prestige to Bankman-Fried when he was on top of the world; Now they are caught up in the fallout.

This could precipitate a long-term shift in how listeners interact with cryptocurrencies.

“I think we’ll see more caution in terms of assessing what might be reputational issues if you go into something that… I might not understand,” said Warren, CEO of the Crypto Council. “Maybe we should think about what it means to be involved in something so new.”

Yadav predicted that the cryptocurrency industry may now turn to sources of validation for non-celebrities — such as legitimacy through regulation, for example.

“I think now celebrities don’t do that anymore,” she said. “Certainly not the big names.”