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The lawsuit states that FTX’s ad campaigns presented the company and its yield-bearing accounts as safe investments.
Troubles for bankrupt crypto exchange FTX don’t seem to end anytime soon. A fresh lawsuit has been filed against FTX ex-chief Sam Bankman-Fried and Golden State Warriors on accusations of false advertising.
Bankman-Fried and New Lawsuit
Canadian citizen Elliott Lam has filed the lawsuit in a San Franciso court this week. As per details, Lam’s lawsuit is against FTX’s Sam Bankman-Fried, Alameda Research CEO Caroline Ellison, and the Golden State Warriors.
The lawsuit aims at the massive advertising campaigns, including major sponsorship deals with stadiums and other professional sports teams such as the Golden State Warriors. The lawsuit states that FTX’s ad campaigns presented the company and its yield-bearing accounts as safe investments.
Thus, this lawsuit seeks explicitly to leverage California’s False Advertising Law while taking a particular aim at the Golden State Warriors. The complaint of the lawsuit reads:
“Defendants’ claims that YBAs and FTX were viable and safe for investing in crypto are untrue due to the house of cards nature of FTX’s business and movement of funds, as evidenced by the immense collapse in fall 2022″.
Since the FTX crisis unraveled, this is not the first-of-its-kind case. Last week, class actions targeted celebrities endorsing FTX including Gisele Bundchen, Tom Brady, Steph Curry, and Larry David.
FTX’s Collateral Tanks by $51 Billion
In a message to employees on Tuesday, November 22, FTX’s former CEO Sam Bankman-Fried apologized to the staff by outlining a crash in the collateral, from $60 billion to $9 billion. A number of factors such as a “run on the bank”, credit squeeze, and sell-off in virtual coins led to a $51 billion crash in collateral. In a message to his staff, SBF wrote:
“I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again. I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash”.
The drop in the value of crypto assets held by FTX itself contributed to a $30 billion crash in the collateral. Also, the bankruptcy proceedings at the company have exposed some of the loopholes in the company’s documentation and financial controls. It also reveals how the exchange misappropriated customers’ funds via a web of FTX-related entities.
Additionally, details show that the funds belonging to FTX were used to buy homes and other personal items for the staff. The attorneys appointed in the case noted that $300 million were used to buy properties for SBF and his family in the Bahamas.