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Business News/ News / FTX Investors Settle With Sam Bankman-Fried to Pursue Promoters
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FTX Investors Settle With Sam Bankman-Fried to Pursue Promoters

A group of FTX investors and customers has agreed to drop their claims against co-founder Sam Bankman-Fried in exchange for his cooperation against other defendants in a sprawling set of lawsuits over the cryptocurrency exchange’s collapse.

FTX Investors Settle With Sam Bankman-Fried to Pursue PromotersPremium
FTX Investors Settle With Sam Bankman-Fried to Pursue Promoters

(Bloomberg) -- A group of FTX investors and customers has agreed to drop their claims against co-founder Sam Bankman-Fried in exchange for his cooperation against other defendants in a sprawling set of lawsuits over the cryptocurrency exchange’s collapse. 

The agreement, if approved by a judge, would free Bankman-Fried from civil liability only weeks after he was sentenced to 25 years in prison for fraud for stealing billions of dollars from FTX. According to the settlement, filed Friday in federal court in Miami, plaintiffs in the multi-district litigation would resolve all claims against him now and in the future. 

In return, the 32-year-old fallen crypto idol would help them go after celebrities, social media influencers and others who promoted FTX, in which they ended up losing money. Bankman-Fried would hand over all nonprivileged documents detailing his assets and his investment in artificial intelligence start-up Anthropic, an affidavit certifying his net worth as negative, and documents about other defendants in the wide-ranging civil litigation. 

Read More: FTX Investors Boosted by Guilty SBF in Bid to Blame Promoters

That list of defendants is long after several lawsuits filed in the wake of the FTX meltdown were consolidated into one case in Miami. Financiers and celebrity endorsers, including sports stars Tom Brady and Shaquille O’Neal and model Gisele Bundchen, were accused of promoting the exchange’s unregistered securities and enticing investors into a Ponzi scheme.

And, if they prevail, the plaintiffs could win far more than they appear to be giving up. The settlements with promoters in the pact are valued at about $1.3 million, according to a filing in the case.

A lawyer for Bundchen, O’Neal and Brady didn’t immediately respond to a request for comment on the settlement.

Superstar Endorsements

When FTX was flush, Bankman-Fried spent heavily on endorsements to elevate the profile of his crypto empire using the fame of athletes and other stars. For example, an FTX affiliate said in a bankruptcy filing that pro football quarterback Trevor Lawrence received a $500,000 payment in September 2022. 

The settlement includes a deal with Lawrence, according to the filings. Lawrence, who plays for the Jacksonville Jaguars, was selected first by the Jaguars in the 2021 National Football League draft and signed on as an FTX endorser that year. His lawyer David A. Rothstein said he couldn’t immediately comment on the settlement.

Read More: Bankman-Fried Sentenced to 25 Years in Prison for FTX Fraud 

Mark Botnick, a spokesman for Bankman-Fried, said his client wants to set things right.

“Since the collapse of FTX, Mr Bankman-Fried has been singularly focused on returning the estate’s assets to customers, who could and should be made whole as of current prices," Botnick said. Referring to a lawyer for the plaintiffs, Botnick added: “He looks forward to continuing to work with Adam Moskowitz and his team to do so."

Risk/Benefit

In asking the judge overseeing the case to approve the settlement, the plaintiffs’ attorneys said they accounted for the uncertain outcome and risk of litigation against Bankman-Fried and decided he would be “valuable" to the remaining litigation, according to the filing.

Bankman-Fried was convicted at trial late last year and sentenced in late March. Prosecutors showed that the 32-year-old siphoned customer funds from FTX to its sister hedge fund Alameda Research to spend on political donations, luxury real estate and speculative investments. 

Bankman-Fried is in custody at the Metropolitan Detention Center in Brooklyn, New York, before he is transferred to the prison where he will serve his term. He plans to appeal his sentence and conviction. 

The civil litigation is FTX Cryptocurrency Exchange Collapse Litigation, 23-md-03076, US District Court, Southern District of Florida (Miami).

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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Published: 20 Apr 2024, 01:38 AM IST
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