FTX investors have sued the company’s ex-CEO Sam Bankman-Fried for illegally offering yield-bearing crypto accounts at the now insolvent exchange.
- The lawsuit, filed in Miami on Tuesday, alleges that FTX’s crypto-yield-bearing accounts were unregistered securities illegally sold in the US, according to Reuters.
- Now that the exchange has failed to honor withdrawals, investors claim to have sustained $11 billion in damages.
- The lawsuit also seeks damages from Numerous celebrities who were involved with promoting FTX, such as Tennis Star Naomi Osaka and NFL quarterback Tom Brady. Many high-profile athletes and teams have been rushing to cut ties with the firm over the past week, including the Golden State Warriors.
- Multiple crypto lenders have been targeted by state securities regulators this year for offering unregistered crypto yield products, including Nexo. The Securities and Exchange Commission (SEC) stopped Coinbase from listing a similar product in September 2021.
- SEC Chairman Gary Gensler has expressed suspicion over the unusually high yields of such crypto accounts frequently offered. “How does somebody offer (such a large percentage of returns) in the market today and not give a lot of disclosure?” he asked at the RFK Human Rights Compass Summer Investors Conference in June.
- The SEC and CFTC are reportedly investigating FTX for suspected embezzlement of $10 billion in client assets to SBF’s trading company Alameda Research.
- Bankman Fried is now seeking billions from investors to help plug an $8 billion hole in its balance sheet.