Will Sports Stars And Celebrities Continue To Endorse Or Accept Pay In Crypto After Being Entangled In The FTX Scandal?

After weeks of disgraced crypto CEO Sam Bankman-Fried’s media blitz, ranging from events sponsored by the New York Times, Good Morning America and Twitter Spaces, United States prosecutors announced their criminal case against Sam Bankman-Fried, the former multi-billionaire founder of crypto exchange FTX, after his arrest in the Bahamas.

In light of SBF’s lavish donations to politicians and news outlets, there were concerns that he might talk his way out of this disaster. Despite his powerful connections, SBF was indicted on eight criminal charges. The U.S. Southern District of New York accused SBF of wire fraud and conspiracy by misusing customer funds. The FTX crypto wunderkind was arrested Monday in the Bahamas and was arraigned in a Nassau court the next day.

Celebrities And Sports Stars Ensnared In The FTX Scandal

A lawsuit, seeking a class action, was brought by Edwin Garrison, an FTX investor. Adam Moskowitz and legendary attorney David Boies are representing the plaintiff. The two litigators recently worked together on a class-action suit against Voyager, a crypto exchange that filed for bankruptcy protection.

According to SBF, in his many interviews, the once-rich, alleged scammer said he has little funds at his disposal. While that is up to dispute, attorneys are turning their focus on wealthy sports stars and celebrities who were handsomely paid to endorse and promote the FTX platform and its crypto offering, including the FTT coin.

The suit cites big names, like basketball stars Shaquille O’Neal and Stephen Curry and investor and Shark Tank host Kevin O’Leary, also known as Mr. Wonderful, as being accused of shilling unregistered cryptocurrency securities. It’s alleged that a big part of the alleged scheme, according to the lawsuit, was to boast top stars who vouched for FTX’s products. Sports figures and celebrity endorsers will likely get involved in lengthy and costly lawsuits.

Tom Brady, Tampa Bay Buccaneers quarterback, and his ex-wife Gisele Bundchen, comedian Larry David, co-creator of Seinfeld and star of Curb Your Enthusiasm, also stand accused of deceiving investors by failing to disclose the amount of compensation,their role in touting the company and its offerings and not conducting reasonable due diligence before extolling the virtues of the coins that were sold to investors, which may be a violation of securities laws. It’s murky territory, as cryptocurrencies have not all been considered securities and, therefore, may not fall under certain securities laws.

Udonis Haslem, Miami Heat forward; MLB Hall-of-Famer David Ortiz; quarterback Trevor Lawrence of the Jacksonville Jaguars; Los Angeles Angels Shohei Ohtani and tennis star Naomi Osaka were also named as parties in the lawsuit.

In addition to serving as pitchmen and women, according to the lawsuit, Brady and Bundchen accepted equity stakes in FTX and were featured in the crypto platform’s “FTX: You In?” ad campaign in 2021.

Separately, boxer Floyd Mayweather, Kim Kardashian, former NBA player Paul Pierce, music producer DJ Khaled and Dallas Mavericks owner Mark Cuban were involved with unrelated crypto endorsements and promotions.

Athletes Took Too Much Of Risk In Getting Paid In Crypto Instead Of Cash

At the beginning of 2022, sports stars, politicians and other high-profile people requested to take their compensation in digital assets. They pointed out that if you get paid in U.S. dollars, as inflation increases, the value of your paycheck decreases.

Green Bay Packers quarterback Aaron Rodgers previously announced that he wanted to receive his compensation in bitcoin back in early November. At the time, the coin was more than $60,000—it’s now trading at around $17,000.

NFL star Odell Beckham Jr., wide receiver for the Los Angeles Rams, signed a one-year deal with a base salary of $750,000 and bonuses that could bump it up to $4.25 million. The NFL wide receiver said he was taking his entire salary in bitcoin. He reportedly converted a $750,000 paycheck into bitcoin. The value of Bitcoin has plummeted since then.

Saquon Barkley, a New York Giants running back, announced in July 2021 that he would place all of his endorsement earnings—totaling around $10 million—in bitcoin. He received his payments at the end of the year when bitcoin had not crashed as much as it has now. Since then, the market has taken a hit and unless he sold his positions, the odds are high that Barkley took a big hit.

Trevor Lawrence, the No. 1 draft pick in 2021 and the current quarterback for the Jacksonville Jaguars, partnered with cryptocurrency app Blockfolio to announce that he’d place his approximate $24 million signing with the company. He’ll convert the cash into bitcoin, Ethereum, Solana and other digital assets, according to USA Today.

It’s A Safer Bet To Wait For New Regulations Before Endorsing Crypto

Until the Securities and Exchange Commission and other regulatory bodies and lawmakers enact rules and regulations for the crypto sector, it is essential to be extremely cautious. Once rules and oversight are established, it may be a more viable option.

At this juncture, it is prudent for athletes and celebrities to steer clear of endorsing or accepting payment in cryptocurrencies. Bitcoin, the most prominent digital asset, dropped below $16,000 in November, only a year after it hit a record high of $69,000 in November 2021. The crypto sector saw its market capitalization plummet from around $3 trillion to about $900 billion. These issues have frighted both owners of digital assets and potential buyers of altcoins.

In addition to a bear market, well-known crypto exchanges, including Terra Luna, Celsius, Voyager, FTX, Alameda, 3AC, BlockFi and others, collapsed or filed for bankruptcy protection.