Bloomberg Law
May 25, 2023, 7:06 PM

FTX’s Bankers, Endorsers Should Face Class Suits, Lawyers Argue

Jef Feeley
Jef Feeley
Bloomberg News

Financiers and celebrity endorsers of the failed FTX cryptocurrency exchange should face consolidated class-action lawsuits over the billions lost in the meltdown of Sam Bankman-Fried’s digital-asset empire, investors’ lawyers argued Thursday.

Venture capital and private equity firms including Sequoia Capital Operations LLC and Thoma Bravo LLC – along with sports icons such as ex-NFL quarterback Tom Brady, former Boston Red Sox slugger David Ortiz and ex-NBA center Shaquille O’Neal – should face a single judge overseeing allegations they enabled Bankman-Fried’s alleged fraud, attorneys for crypto investors told a panel of federal judges.

While FTX sought Chapter 11 protection in Delaware in November, federal laws freezing litigation against companies in bankruptcy court don’t apply to third parties, allowing investors to take aim at people and companies that allegedly facilitated the exchange’s actions.

Gathering the suits will help take what many have described as “unwieldy cases” targeting those who aided and abetted FTX’s misdeeds and make them manageable, veteran lawyer David Boies, told the panel on Multi-District Litigation (MDL) in a hearing in Philadelphia.

Such MDLs are designed to reduce costs by eliminating duplicative pre-trial document exchanges and provide a venue for test trials to weigh the value of claims. Some companies, however, criticize MDLs as a way for judges to wrongfully strong-arm settlements of suits.

Bankman-Fried is facing criminal fraud charges after federal prosecutors alleged he masterminded of one of the biggest scams in US history, fraudulently raising at least $1.8 billion despite having assured investors FTX had appropriate controls and risk management. He’s also accused of misusing customer funds at FTX to cover personal expenses and real estate purchases.

Boies and his allies urged the panel to send the nearly dozen cases to federal court in Miami, where FTX operated in the US and US District Judge Cecilia Altonaga is already handling some cases. Other lawyers suggested the cases would be better handled in federal court in San Francisco, where US District Judge Jacqueline Scott Corley is overseeing some FTX claims.

While some FTX insiders are named as defendants, none were executives or directors at the time of the bankruptcy filing, said Adam Moskowitz, a Miami-based lawyer representing FTX investors. “We were very careful in who we sued,” he said outside the hearing.

Such targeted class-actions have reaped billions in settlements from banks and other players in past big-name businesses collapses, including Enron Corp. and WorldCom Inc.

The case is In RE: FTX Cryptocurrency Exchange Collapse Litigation, MDL No. 3076, US Judicial Panel on Multidistrict Litigation (Philadelphia).

To contact the reporter on this story:
Jef Feeley in Wilmington, Delaware at

To contact the editors responsible for this story:
Anthony Lin at

Joe Schneider

© 2023 Bloomberg L.P. All rights reserved. Used with permission.

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