The drama surrounding the collapse of FTX continues to unfold with a surprising twist. Crypto prodigy turned convicted fraudster Sam Bankman-Fried agreed to cooperate with investors sue celebrities who support the company, including sports stars Tom Brady and Shaquille O’Neal, as well as actor Larry David.
The move comes as a shock given that Bankman-Fried is currently appealing his 25-year prison sentence for defrauding FTX customers. The class action lawsuit against the celebrities accuses them of deception and misrepresentations about the security of FTX’s crypto assets. Investors believe Bankman-Fried’s insider knowledge can significantly strengthen their case.
Sam Bankman-Fried: playing the role of the Snitch
Bankman-Fried, once hailed as the crypto messiah, saw his empire collapse in November 2022 when FTX filed for bankruptcy. The stock market, which rose to prominence in part thanks to a marketing campaign featuring stars such as Tom Brady and Shaquille O’Neal, suffered a liquidity crisis and ultimately imploded.
A group of FTX investors and customers have agreed to drop their lawsuits against co-founder Sam Bankman-Fried in exchange for cooperation against other defendants in lawsuits over the crypto exchange’s collapse -cash. https://t.co/9xmQo0rgpi
– BloombergCrypto (@crypto) April 19, 2024
Today, from his Brooklyn jail cell, Bankman-Fried appears to be play a new game. In exchange for his cooperation, the investors agreed to waive any civil action against him. This agreement, if approved by a judge, could significantly reduce his legal exposure. But what exactly motivated Bankman-Fried to make this decision?
Some legal experts believe Bankman-Fried sees this as a potential opportunity to curry favor with the court in her criminal appeal. Others believe it could be a calculated attempt to shift some of the blame for the FTX debacle onto the celebrities who supported it.
Total crypto market cap at $2.3 trillion on the daily chart: TradingView.com
Can Bankman-Fried deliver the knockout blow?
The lawsuit hinges on whether it can be proven that the celebrities knowingly misled investors about FTX. Sam Bankman-Fried’s cooperation could be crucial in providing evidence of his involvement and understanding of the company’s operations.
For example, if Sam Bankman-Fried can reveal emails or internal communications in which he warns celebrities about the potential risks associated with FTX products, it could significantly strengthen the case against them. However, the effectiveness of its cooperation could be limited.
Celebrity endorsement deals often involve carefully crafted scripts and limited due diligence on the part of the talent. If Bankman-Fried fails to provide concrete evidence of deliberate deception on the part of the endorsers, the trial could fail.
The fallout from FTX’s collapse continues to reverberate across the entire crypto industry. This latest development, with a disgraced CEO potentially becoming a state witness against famous icons, is sure to inject even more drama into an already gripping saga.
Featured image by Eduardo Munoz/Reuters, chart by TradingView
