FTX Lawsuit Expands: MLB, Formula 1, and Mercedes F1 Racing Team Now in the Crosshairs

The fallout from the FTX crypto exchange collapse continues to ripple through the financial and sports worlds. If you thought the drama was over, think again! FTX users, still reeling from the exchange’s dramatic implosion and the loss of a staggering $11 billion, are escalating their legal battle. This isn’t just about recouping funds; it’s about holding everyone accountable who they believe played a role in the debacle. And their sights are now set on some major players: Major League Baseball (MLB), Formula 1 racing, and the Mercedes-Benz Group AG’s Formula 1 racing team.

Why are MLB, Formula 1, and Mercedes F1 Racing Team Being Sued?

Imagine losing your hard-earned money in a platform you believed was legitimate, partly because it was endorsed by big names and organizations you trust. This is the crux of the FTX users’ argument. They allege that these sporting giants actively promoted FTX through lucrative partnerships, thereby enticing investors and contributing to the exchange’s perceived credibility. Now, these users are seeking to recover their lost billions, and they’re not afraid to go after some of the biggest names in sports and automotive.

On November 27th, the legal action intensified as three separate complaints were filed against MLB, Formula 1, and Mercedes-Benz Group AG’s racing team. These complaints, now consolidated into a class-action lawsuit, accuse these entities of “aiding and abetting and/or actively participating in the FTX Group’s massive, multi-billion-dollar global fraud.”

Let’s break down the core accusations:

• Aiding and Abetting Fraud: The plaintiffs argue that MLB, F1, and Mercedes F1 actively helped FTX perpetrate fraud by lending their prestigious brands to promote the exchange.
• Promoting Unregulated Securities: The lawsuit claims these organizations promoted the sale of unregistered securities through their FTX partnerships, contributing to the $11 billion user losses.
• Ignoring Red Flags: Plaintiffs allege that these entities turned a blind eye to obvious warning signs surrounding FTX in their pursuit of financial gain from the booming crypto market.

According to a Bloomberg report, lawyers representing the plaintiffs are asserting that these organizations were “quick to jump into the crypto world with both feet when they saw the potential for fast money,” highlighting the alleged eagerness to capitalize on the crypto hype.

Read Also: FTX Token Skyrockets Over 40% As Binance Faces Legal Battle

What’s the Legal Basis for this Expanded Lawsuit?

Previously, some celebrity endorsers named in the initial lawsuit argued that their promotions didn’t explicitly instruct users to deposit funds into FTX, thus weakening the claim of direct causation. However, the legal team behind this expanded class-action lawsuit believes they have a stronger case, citing evolving legal interpretations in the “internet age.”

Adam Moskowitz, the lead counsel, points to a significant 2022 decision by the 11th Circuit Court of Appeals. This ruling, applicable in Alabama, Georgia, and Florida, interprets the Securities Act of 1933 to mean that promoters using mass media, including the internet, can be held liable for customer losses if they disseminate misleading information.

In a Yahoo Finance report, Moskowitz emphasizes the “punitive penalties” associated with promoting unregistered securities under this law. His argument rests on the idea that if FTX is deemed to be offering unregistered securities, and if these organizations had a financial interest in promoting them, then liability is established regardless of the specific wording used in their promotional campaigns.

In essence, Moskowitz is arguing that the law will likely find social media and internet-based promoters liable for client losses in such scenarios. This legal interpretation forms the bedrock of this expanded lawsuit and signals a potentially significant shift in how promotional liability is viewed in the digital age.

Will MLB, Formula 1, and Mercedes F1 “Get Away”?

The question now is, will these sporting giants be able to deflect these accusations? While the legal battle is just beginning, the plaintiffs’ legal team seems confident. They believe that the legal landscape is evolving to hold promoters more accountable for the products and services they endorse, especially in the complex and often unregulated world of cryptocurrency.

Here’s a summary of the key legal arguments against MLB, Formula 1, and Mercedes F1 Racing Team:

• Securities Act of 1933: The lawsuit leverages the Securities Act of 1933, arguing that FTX’s offerings were unregistered securities.
• Promotional Liability: It asserts that MLB, F1, and Mercedes F1 acted as promoters with a financial interest in FTX, making them liable for user losses under the aforementioned Act and recent legal interpretations.
• Mass Media Promotion: The lawsuit emphasizes that the promotions occurred through mass media channels, falling under the scope of the 11th Circuit Court of Appeals ruling.

The outcome of this lawsuit could set a precedent for future cases involving celebrity and organizational endorsements of crypto platforms. It raises critical questions about due diligence, promotional responsibility, and the extent to which high-profile entities can be held accountable for the potential risks associated with the products they promote.

The coming months will be crucial as this legal battle unfolds. Will MLB, Formula 1, and Mercedes F1 be held liable for promoting FTX? Only time and the courts will tell. One thing is certain: this expanded lawsuit underscores the growing legal scrutiny surrounding crypto promotions and the potential consequences for those who choose to endorse them.