Here's All the Lawsuits Against FTX So Far

Five lawsuits have been filed in the month since FTX's spectacular collapse and allege vast conspiracies to mislead and defraud customers.
Here's All the Lawsuits Against FTX So Far
Bloomberg / Contributor

As disgraced FTX founder and former chief executive Sam Bankman-Fried makes the media rounds, apologizing while simultaneously pointing the finger away from himself against the advice of his lawyers, the lawsuits have already begun to pile up. 

Over the past few weeks, four civil lawsuits have been filed against Bankman-Fried alleging all manner of fraud, theft, deception, and other crimes. These civil suits are separate from the probes and investigations launched by the Department of Justice, US Attorney’s Office in Manhattan, the state of California, and the Bahamas, the Securities and Exchange Commission, and the Commodities Future Trading Commission. Still, the lawsuits and the allegations therein—which have not yet been tested in court—represent more problems to come for Bankman-Fried, whose public comments about what he knew, or didn't, prior to FTX's sudden implosion this month may well be used against him in court


The first lawsuit was filed on November 15 in Florida federal court by Edwin Garrison, an FTX investor who applied to have FTX investors certified as a class and the lawsuit to be a class action. Garrison also names a number of high-profile celebrities and public figures (Tom Brady, Gisele Bundchen, Stephen Curry, the Golden State Warriors, Shaquille O'Neal, Udonis Haslem, David Ortiz, William Trevor Lawrence, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin O'Leary) for their role in promoting FTX in marketing campaigns.

In his complaint, Garrison alleges FTX's interest-bearing crypto accounts were illegally offered securities, that the company engaged in deceptive and unfair business practices, and that it was engaged in a "fraudulent scheme" that intentionally took advantage of "unsophisticated investors." 

This lawsuit is particularly important for two reasons. The first is the legal question of how much individuals who promote allegedly fraudulent schemes are liable. Garrison argues that "misrepresentations and omissions" led him to buy yield-bearing accounts and that these celebrities were not only instrumental in the scheme but stood to profit in a way beyond mere promoters, endorsers, or influencers. 

Brady and Bundchen took equity stakes in FTX in June of last year and participated in its advertising. Osaka also gained an equity stake and was paid "in unspecified amounts of cryptocurrency" to become an FTX brand ambassador that pushed women to invest in crypto. The complaint uses this and other examples to accuse the defendants of violating Florida's Securities and Investor Protection Act by helping FTX offer and sell unregistered securities in what amounts to a Ponzi scheme. 


“The Deceptive FTX Platform maintained by the FTX Entities was truly a house of cards, a Ponzi scheme where the FTX Entities shuffled customer funds between their opaque affiliated entities, using new investor funds obtained through investments in the [yield-bearing accounts] and loans to pay interest to the old ones and to attempt to maintain the appearance of liquidity,” the complaint reads.

Garrison’s lawsuit alleges that while celebrities did disclose their partnerships with FTX, they did not properly disclose "the nature, scope, and amount of compensation they personally received in exchange for the promotion of the Deceptive FTX Platform" and that this is a violation of anti-touting provisions in securities law. Specifically, Garrison alleges unspecified payments to various celebrities brought on as brand ambassadors in equity and cryptocurrencies.

Interest-bearing crypto accounts have come under fire from regulators already. Before it declared bankruptcy, crypto lender Celsius Network had been sued by Texas, New Jersey, and Alabama for offering unregistered securities in the form of interest-bearing crypto accounts. Celsius had moved to countersue, but in April announced changes that would simply restrict access to these accounts for U.S. investors. The SEC has also sued BlockFi for offering these accounts as unregistered securities and blocked Coinbase from an attempt to offer them as well.


On November 21, one Sunil Kavuri filed a class action lawsuit in Florida that is similar to Garrison's: a class action lawsuit aimed at Bankman-Fried and the celebrities or public figures used to endorse and promote FTX without allegedly properly disclosing their payment or stake in the company. Furthermore, it argues they were promoting unregistered securities that were fraudulently presented as securities to attract customers and interest.

"For that, Defendants are liable for Mr. Kuvari’s losses, jointly and severally and to the same extent as if they were themselves the FTX Entities,” the lawsuit states. 

On November 23, plaintiff Stephen Pierce filed a second class action lawsuit against FTX in Florida that accuses Bankman-Fried of being "one of the great frauds of history" who along with his inner circle "treated [customer] assets as a slush fund to fund their own proprietary investments and a variety of personal boondoggles" as well as using insider knowledge to profit at their customers expense. 

Pierce also accuses FTX and its inner circle of conspiring with "various professionals and firms" to perpetuate "a years-long pattern of racketeering and conspiracy characterized by numerous instances of theft, wire fraud, bank fraud, money laundering, and trafficking in stolen property."

This lawsuit is different from Garrison’s in that the additional plaintiffs are not celebrities and promoters, but Alameda Research chief executive Caroline Ellison, FTX and Alameda Research co-founder and FTX CTO Zixiao Gary Wang, and Nishad Singh, who served as director of engineering at Alameda Research and then FTX. The suit also names Armanino LLP, an accounting and consulting firm FTX hired for corporate audits, and Prager Metis CPAs LLC, another accounting and consulting firm brought in to audit the FTX Group.


Many of the allegations here have already been reported on in the media. $10 billion in FTX customer funds were allegedly used to "fund venture investments, cover trading losses, and pay Alameda's debts," the lawsuit states. Bankruptcy documents have also shown that FTX Group loaned billions of dollars to a Bankman-Fried shell company, to Bankman-Fried himself, and other executives. 

The lawsuit alleges FTX Group exempted Alameda Research from FTX's auto-liquidation protocols so that Alameda Research could make losing trades without forfeiting collateral—one of the many poor security and financial controls revealed by John J. Ray III, FTX's new chief executive, after he took control. The complaint also highlights independent blockchain analyses that appears to show FTX Group was using "inside knowledge about future listings on the FTX exchange to 'front run' the market and their own customers—purchasing stockpiles of soon-to-be-listed cryptocurrencies and selling them at inflated prices" after they were announced, the lawsuit alleges.


Bankman-Fried has gone to great lengths to paint Alameda Research—the trading firm he founded before FTX and owned 90 percent of—as being entirely separate from FTX, and that he didn't have a handle on what its activities were. Reporting from numerous outlets has thrown that characterization into serious doubt, and Pierce's lawsuit picks up that thread. 

The lawsuit alleges "the appearance of separation" was maintained but that the small group of insiders that ran the FTX empire, who all lived together at one point, "routinely discussed and plotted the Alameda and Venture SIios' trading and investment strategies in light of inside information about market conditions and market-moving opportunities created by their ownership of the FTX and FTX US Silos."

At one point, the lawsuit points to comments made by Ellison on her Tumblr blog to show she was aware of the fraud she was allegedly engaged in by maintaining Alameda was separate from FTX Group: "How do I signal my genuinely sweet and feminine nature on my dating profile? Should it go before or after the section on wire fraud"

Finally, on November 21, Elliot Lam filed a class action lawsuit in California against Bankman-Fried, Ellison, and the Golden State Warriors, in an attempt to "recover damages, declaratory and/or injunctive relief stemming from fraudulent and deceitful conduct of Defendants and their promotion and marketing of FTX Entities' trading platform and their YBAs. Lam accuses the defendants here of being in violation of California's Unfair Competition Law, in violation of California's False Advertising Law, committing fraudulent concealment, and engaging in a civil conspiracy.


As in the Garrison and Kavuri lawsuits, the suit accuses paid endorsers of promoting unregistered securities presented as safe, secure financial products. To bolster the claim that these crypto interest accounts were securities, Lam points to Director of Enforcement of the Texas State Securities Board, Joseph Rotunda, who said in an October 2022 declaration that FTX was violating securities law through "an offering of unregistered securities in the form of yield-bearing accounts to the residents of the United States." 

The Golden State Warriors appear as defendants here and in other lawsuits because they were engaged in a partnership with FTX and helped drive "unwitting investors and consumers into a Ponzi-like-scheme," the lawsuit alleges, which drove the sale of the crypto interest accounts. The NBA franchise’s partnership was a deep one: the team unveiled the FTX logo on its court in the $1.4 billion Chase Center, took on FTX as its "Official Cryptocurrency Platform and NFT Marketplace" and dropped NFTs on FTX.US early in 2022.

This partnership, the lawsuit alleges, went even further in helping FTX reach new heights it may not have been able to otherwise at home and abroad. FTX was now, for example, a visible presence for the teams' millions of fans through its G League affiliate team, esports teams, and both virtual and physical floor space, on top of the new crypto assets and services offered by the franchise and trading platform.

The most recent lawsuit was filed on December 2 by Russell Hawkins in California—another class action lawsuit making similar claims to Lam's lawsuit. Here, the defendants are Bankman-Fried, Wang, Singh, Ellison, Armanino, and Prager Metis, all of whom Hawkins accuses of engaged in a conspiracy to mislead and defraud FTX customers.

Lawyers representing each of the lawsuits did not respond to Motherboard’s request for comment.