When Michael Livieratos saw quarterback Tom Brady in a commercial for the cryptocurrency trading platform FTX, he knew exactly where he wanted to put his $30,000 crypto investment.
"As a New England Patriots fan my entire life, you can imagine the influence that Tom Brady would have," said Livieratos, a 56-year-old legal clerk who lives in Connecticut. He soon moved nearly all his money from another crypto exchange to FTX.
Then FTX filed for bankruptcy in a spectacular collapse that vaporized at least $10 billion in assets, according to bankruptcy filings, including all the money Livieratos had on the platform. Now he is a plaintiff in a proposed class-action lawsuit that seeks to hold Brady, his supermodel ex-wife, Gisele Bündchen, and nine other celebrity endorsers of FTX responsible for luring him into a very bad deal.
Until its collapse, FTX had been one of the world's largest cryptocurrency exchanges - and one of the most aggressive at marketing digital currencies to the masses. The company had partnerships with NBA teams, patches on Major League Baseball umpire uniforms and the naming rights to the Miami Heat arena. It ran splashy TV ads during NBA and NFL games, including last year's Super Bowl, in which celebrities portrayed FTX as an exciting but safe place to invest money.
On Tuesday, the U.S. government brought both criminal charges and civil actions against Sam Bankman-Fried, the 30-year-old founder of FTX, accusing him of orchestrating one of the biggest financial frauds in U.S. history. But the odds of restitution for FTX customers like Livieratos are slim. "We're not going to be able to recover all the losses here," FTX's new chief executive John J. Ray III told a House committee.
So Livieratos and his fellow plaintiffs are trying a different approach. Working with Coral Gables, Fla., lawyer Adam Moskowitz, their lawsuit seeks to shift the focus from FTX executives to what Moskowitz sees as a larger circle of complicity that includes some of the world's most celebrated actors and athletes.
Moskowitz argues that FTX's interest-bearing accounts were a security, which would require Brady and other promoters to reveal the details of their payments from FTX. The complaint claims "they have never disclosed the nature, scope, and amount of compensation they personally received in exchange for the promotion." Instead, they appeared in ads featuring such moments as an enthusiastic Brady dialing up everyone in his contact list to pitch crypto trading on FTX, asking again and again: "You in?"
"You have very rich people we all love telling us that they checked this out, and it was okay," Moskowitz said in an interview. "Why shouldn't they be held responsible?"
In part, Moskowitz's lawsuit reflects the reality that wealthy celebrities are likely to have large amounts of money left - unlike Bankman-Fried, who has said he has $100,000 in the bank and only one working credit card. Celebrities also may be inclined to settle quickly to avoid the bad publicity of a protracted court proceeding.
But there are significant legal hurdles to holding promoters accountable. Just this month, a federal judge in California dismissed a lawsuit from investors accusing reality-TV star Kim Kardashian, boxer Floyd Mayweather Jr. and others of touting an obscure crypto token known as EMAX as part of a plan to artificially inflate the coin's value. Though the celebrities agreed to pay millions in fines to the Securities and Exchange Commission for failing to disclose that they had been paid to promote the token, Judge Michael W. Fitzgerald said investors are partly responsible for what happens to their money.
While the case "raises legitimate concerns over celebrities' ability to readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach," Fitzgerald wrote, investors should "act reasonably before basing their bets on the zeitgeist of the moment."
Moskowitz, who specializes in class-action lawsuits, didn't set out to become a crypto watchdog. But as Miami has become a hub of crypto investment - and as case referrals came to him from consumers who'd lost money from various digital-currency scams - he started scrutinizing the industry.
"It seemed like a lot of investors were getting hurt and no one was really looking out for them," said Moskowitz, who has also brought prominent lawyer David Boies onto his lawsuit.
If FTX's accounts are ruled to be securities, Moskowitz argues that the celebrities could be responsible for investor losses under many states' strict "blue sky" laws that ban the promotion of unregistered securities - and hold promoters liable even if they didn't understand what they were endorsing.
FTX and most of the crypto industry has maintained that digital assets are not securities. But citing a standard that emerged from a 1946 Supreme Court case, Moskowitz's complaint argues that they are, saying they fit the definition of a public investment in which the investor benefits from the efforts of others.
Demonstrating that the interest-bearing accounts FTX offered were in fact unregistered securities won't be simple, given how contentious and unresolved the issue remains among regulators. Moskowitz has separately filed a state class action in Florida against Brady and two others and asked the judge, Michael Hanzman, to rule on that question.
Even if the judge rules FTX interest-bearing accounts were not securities, Moskowitz says, he will argue that celebrities should be liable under a strict Florida consumer protection law, which bans "unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce."
All of the defendants in Moskowitz's federal class action - from tennis champion Naomi Osaka to NBA star Stephen Curry to entrepreneur Kevin "Mr. Wonderful" O'Leary from the business reality show "Shark Tank" - also hyped the brand. In a video posted to his website less than a month before FTX filed for bankruptcy, O'Leary said he had total confidence in the exchange. "If there's ever a place I could be that I'm not gonna get in trouble, it's going to be at FTX," O'Leary said.
Moskowitz argues that such comments make his case extremely persuasive - especially coming from someone like O'Leary, who is regarded as a savvy businessman.
"O'Leary is someone people trust because he's on 'Shark Tank,' " Moskowitz said. "Who doesn't love 'Shark Tank?' "
Spokespeople for Brady, Bündchen, Osaka, Curry and O'Leary did not reply to requests for comment. A lawyer for Brady did not provide a comment for this story.
Sunil Kavuri, a 42-year-old crypto investor from Britain and a plaintiff in the case, said O'Leary's endorsement was the reason he put a seven-figure sum into an FTX account, including funds he intended to use for his 2-year-old son's education. All that money is now gone, Kavuri said, stuck with the funds of so many others in FTX bankruptcy proceedings. Kavuri said he thought that, since O'Leary ran a successful investment fund that's regulated by the SEC, he would be familiar with the legal limits of undue promotion.
In an interview last week on CNBC's "Squawk Box," O'Leary said he was paid just under $15 million to be a spokesman for FTX, much of which is gone. (He says he put the bulk of the money into crypto through the exchange, and prices have since plummeted. About $4 million went to taxes and his agent's fees, and $1 million went to equity in FTX, which is now worthless.)
Asked about an August 2021 statement that FTX met his "own rigorous standards of compliance," O'Leary said he and other institutional investors "relied on each other's due diligence."
Now, "we all look like idiots," he said.
Moskowitz's pursuit of A-listers actually began with a separate case against Dallas Mavericks owner Mark Cuban, O'Leary's co-star on "Shark Tank," who promoted Voyager, a now-bankrupt cryptocurrency lender.
In October 2021, Cuban held a news conference with Voyager co-founder Steve Ehrlich announcing a five-year partnership with the Mavericks that would, as Cuban put it, "come up with new ways to introduce Mavs fans to cryptocurrency and help them understand it."
In a widely circulated YouTube video, Cuban offered $100 in bitcoin to anyone who downloaded the Voyager app and made a trade worth at least $100. "I think Voyager is going to be a leader among sports fans and crypto fans around the country," Cuban said. American Airlines Arena, where the Mavericks play, soon displayed Voyager ads.
But then crypto prices collapsed and Voyager filed for bankruptcy, leaving many customers unable to access money they thought they could easily reclaim. In August, Moskowitz and Boies filed a proposed class-action lawsuit in federal court in Miami, arguing that Cuban's endorsement was a big factor in creating that false sense of security.
Litigants are waiting for the judge to rule on Cuban's motion to dismiss, with experts divided on the odds of it being granted. In the meantime, Moskowitz is gathering depositions from several NBA veterans, including former Mavericks general manager Don Nelson, in a bid to show Cuban's deep involvement with Voyager.
In a brief email to The Post, Cuban said that as a sponsor of the Mavericks, Voyager was "supported by the team as we would any sponsor." A lawyer for Cuban and the Mavericks, Stephen A. Best, said Moskowitz has not demonstrated that Cuban's statements prompted anyone to do business with Voyager.
"Mark Cuban and any comments that he made were part of an announcement of a sponsorship whereby Voyager became an official sponsor of Dallas Mavericks," Best said, adding: "You'll find that . . . there's a question as to whether any comments were relied upon by the named plaintiffs in this case."
The FTX case makes similar claims against defendants including basketball stars Shaquille O'Neal and Udonis Haslem, quarterback Trevor Lawrence and baseball players David Ortiz and Shohei Ohtani. A representative for Ortiz declined to comment. Representatives for O'Neal, Haslem, Lawrence and Ohtani did not respond to requests for comment.
There is precedent for celebrities paying up after pushing failed investment schemes. In 1990, the actor Lloyd Bridges settled a case for an undisclosed sum after he made a commercial touting A.J. Obie & Associates, a Detroit-based company whose executive was sentenced to jail in a mortgage scam.
Jeff Greenbaum, a New York advertising attorney, said celebrity endorsers can be held liable in false-advertising claims, but the Federal Trade Commission has typically been the main enforcer. It's far less common for a private plaintiff to bring legal action against an endorser, he said, adding that courts have generally been hesitant to hold spokespeople responsible when investments go bad.
In the FTX case, "what we're all going to be watching really closely is: What standards are the courts going to apply?" Greenbaum said. "In other words, what level of involvement does the celebrity need to have? What level of knowledge does the celebrity need to have" to be found responsible.
To be found liable under Florida's consumer protection law, Moskowitz will have to offer evidence that the celebrities knew FTX may have been deceiving investors, said Florida attorney Daniel Lustig, which is tough to prove. He said that it's likely no one, including Brady, expected FTX to collapse.
Moskowitz acknowledges the case's difficulties. But he notes that the celebrities neglected their responsibility to their fans, who lost large sums of money - and other things, too.
After the FTX bankruptcy, Livieratos took down a photo of Brady that had hung on his wall for years.
"I can't look at it anymore," he said.
WASHINGTON POST