The Sports World and the Collapse of the FTX House of Cards

Feb 24, 2023

By Jeff Birren, Senior Writer


These pages last looked at the collision between the now-infamous FTX and the sports world in December 2022. The Golden State Warriors had recently been named as a defendant in the class action lawsuit, that claimed the Warriors were joined at the hip with FTX in its chicanery. This article will bring readers up to date on that case, as well as other events in the world of sports and FTX.

The Case Against the Warriors Redux

The Complaint against the Warriors was filed in San Francisco on November 21, 2022. Elliott Lam is the lead plaintiff. The case was assigned to Federal District Court Judge Jacqueline Scott Corley. Since the filing of Lam, similar cases were filed in that district. On December 19, 2022, Judge Corley issued an order stating that three cases were related to Lam, so she had the cases reassigned to her. She also reset all filing deadlines, vacated all dates for previously set hearings, and any motions had to be re-noticed. On January 10, 2023, Judge Corley issued an identical order in a fourth case.

So far Lam has yet to break any speed records. Although the initial Complaint was filed on November 21, 2022, the Summons were not issued until December 16, 2022, and as of February 16, 2023, there were no proofs of service filed by Lam’s counsel. Consequently, there are no motions to dismiss, nor Answers from the defendants. However, Lam’s counsel filed a motion on February 3, 2023, to consolidate all five cases; to appoint Lam’s counsel as “co-lead counsel”; appoint liaison counsel; and plaintiff’s executive counsel. The notice refers to several other defendants not included in the Lam Complaint. That motion drew an opposition on February 16, 2023. Lam’s motion does not mention counsel for the Warriors, but it does reference notable law firms representing the defendants in the related cases including Wilmer Cutler Pickering Hale and Dorr; Fried, Frank, Harris, Shriver & Jacobson; and Sidley & Austin. That lineup is unlikely to go quietly into the night, whenever the Summons are served, and motion practice begins.

Lam Did Not Win the Race to the Court

Six days before Lam was filed, Edwin Garrison filed a class action lawsuit in the U.S. District Court of the Southern District of Florida. The Garrison Complaint was 41 pages. It states that: “Plaintiff Garrison purchased an unregistered security from FTX in the form of a YBA and funded the account with a sufficient amount of crypto assets to earn interest on his holdings. Plaintiff Garrison did so after being exposed to some or all of Defendants’ misrepresentations and omissions regarding the Deceptive FTX Platform as detailed in this complaint, and executed trades on the Deceptive FTX Platform in reliance on those misrepresentations and omissions. As a result, Plaintiff Garrison has sustained damages for which Defendants are liable.” The Complaint further states that Garrison seeks “many billions of dollars in damages.”

Like Lam, Samuel Bankman-Fried, FTX’s mastermind, is the lead defendant. Also, like Lam, the Golden State Warriors are a named defendant. But Garrison is far more interesting, starting with its list of defendants. The Complaint also includes the following defendants: “Thomas Brady, NFL Quarterback” and “a brand ambassador of FTX”; Gisele Bundchen, Brady’s then wife; NBA player Udonis Haslem, another “brand ambassador of FTX”; former MLB player and “brand ambassador” David Ortiz; “NBA player Stephen Curry”, yet another “brand ambassador”; as well brand ambassadors Shaquille O’Neal, Jaguars’ quarterback William Trevor Lawrence, MLB player Shohei Ohtani, professional tennis player Naomi Osaka, and various other brand ambassadors from the entertainment field. Garrison also contains links to advertisements from the brand ambassadors, something that was impossible for complaints in the past.

There are unique allegations related to Curry. Garrison alleges that he “had his own nationwide ad campaign pushing the Deceptive FTX Platform” and although “Curry repeatedly denies being cast as an expert in cryptocurrency” he stated that he did not need to be. “With FTX I have everything I need to buy, sell, and trade crypto safely” (emphasis in the original). The Complaint asserts that Curry’s ads highlighted “that ‘first-time,’ inexperienced buyers were the intended targets of the campaign.” It does not state what Curry or the other “brand ambassadors” received in exchange for their FTX endorsements.

The Garrison Complaint also has specific allegations related to the Warriors. Garrison alleges the Warriors signed an eight-figure contact with FTX that made FTX the team’s “official cryptocurrency platform” and that it sold FTX’s products on their exchange. Furthermore, the “partnership between the Warriors and FTX marked the first international rights partner for the Warriors” and thus, the Warriors and FTX “had a visible market presence…internationally.” This sponsorship “also included the Warriors’ G League team,” the Warriors’ “Gaming Squad,” in-arena signage at the Warriors’ Chase Center, and “virtual floor signage at Warriors’ games.” That signage, and the payments to the Warriors, are long gone.

One of the law firms representing Garrison is Boies, Schiller, & Flexner, including the formidable David Boies. Boies is no stranger to litigation in the sports world, having represented the NBAPA in a case against the NBA some years ago, and defending the NFL in a case brought by Brady and other NFL players in 2011.

The Garrison Complaint had four causes of action. Count One is for violations of Florida’s Securities and Investor Protection Act. Count Two is for violations of Florida’s Unfair Trade Practices Act. Count Three is for Civil Conspiracy and Count Four is for Declaratory Judgment. The Complaint contains numerous photographs showing the named defendants endorsing FTX. The case was assigned to District Court Judge K. Michael Moore. Latham & Watkins is one of the defense law firms. The Summons were issued in December 2022. Garrison filed an Amended Complaint on December 16, 2022. In early February 2023 defense counsel were granted an extension of time to respond to the Amended Complaint until April 14, 2023.

FTX and Bankruptcy                                                                                                                                       FTX took the inevitable plunge and filed for bankruptcy on November 11, 2022, in the U.S. Bankruptcy Court in Delaware. The case number is 22-11068-JTD and was assigned to Judge John T. Dorsey. Sullivan & Cromwell is one of the firms handling the case. In January 2023, FTX and their related parties filed a list of FTX “Equity Holders.” Udonis Haslem, one of the Garrison defendants, is listed as having 11,466 Common Shares of FTX. That barely makes a dent in this list.

Two of the NFL’s participants have been hit far harder. Patriots’ owner Robert Kraft had three separate sets of shares in FTX stock and its related entities. His “KPC Venture Capital LLC” held 479,000 Class A Common (CA) Shares in WRS (West Realm Shires), and 43,545 shares in West Realm Series A Preferred (PA) shares. In the records filed with the Court, “KPC Venture Capital” includes in its definition “” Kraft Venture Capital also owned 111,599 Series B Preferred Shares of FTX.

Brady, Kraft’s former quarterback, had 1,144,861Common Shares (CS) of FTX Trading Equity stock, listed on Exhibit B of the Equity Holders list. Other figures from the world of sports may have held FTX’s discredited stock, but most shareholders are not named in the filing, but that instead states, “name on file.” It is not currently possible to calculate the magnitude of their specific losses, as that is not available in court filings to date, nor is the date they purchased their shares in that filing. However, in 2019, FTX common shares reached a high of $79.36 per share, and as of this writing, are priced at $1.5991. Recently Judge Dorsey stated that creditors “will likely not close to recovering the amount of their losses, and it may take some time to recover anything.” Kraft and Brady may have lost millions of dollars investing in FTX, and Brady could lose millions more as a defendant in Garrison.

Bankruptcy, Part II    

It is not just athletes, owners and clubs that have been harmed by FTX’s downfall. The Miami Dade Arena has also taken a major hit. The Arena had entered into a naming rights agreement with FTX, taking on the name FTX Arena for nineteen years. In return it was to receive $135,000,000. FTX failed to make the payments, so the Arena’s lawyers moved quickly. Before the end of November 2022, the Arena asked Judge Dorsey to be let out of the agreement. FTX stipulated to its motion for relief.

On January 11, 2023, Judge Dorsey approved the stipulation that granted a lift of the stay imposed by the bankruptcy filing for this purpose. The two-page court order “authorized” the parties “to take all actions necessary or appropriate to effectuate the relief granted in this Order and to perform their respective obligations under the Stipulation.”  The “relief from the automatic stay shall be effective immediately upon entry of this Order and the 14-day stay provided in Bankruptcy Rule 4001(a)(3) shall not apply. The terms and provisions of the Stipulation shall immediately be effective and enforceable upon entry of this Order.” The Court retained jurisdiction “with respect to any matters, claims, rights or disputes arising from or related to the implementation of this Order and the Stipulation.”

The Arena wasted little time in removing the now infamous “FTX” from the Arena, including off the roof and court, above many entrances, and even on the shirts of various employees. That process cannot be cheap. It began to search for a new naming rights partner, and in the interim the Arena is currently named the “Miami-Dade Arena.” The Miami Heat are yet another victim of the scandal, as the team was to receive $2,000,000 a year from the Dade County-FTX naming rights deal.                                                                                                                                                                                  

Criminal Charges

Federal criminal charges were filed against Bankman-Fried and other executives of FTX and its related entities. The eight felony charges include wire fraud, securities and commodities fraud, money laundering, and campaign finance violations. Several executives quickly pled guilty. Bankman-Fried was able to post a bond to remain out of jail pending the trial, with the aid of his parents. As noted in the December article, his parents are both Stanford Law School professors. His father worked for FTX for eight months. The bond was based in part on using his parents’ house in Palo Alto as security. However, it must have slipped their minds that the house is on property owned by Stanford and leased to them. Consequently, there are restrictions in the lease should they try to sell the house. This apparent oops, and his father’s FTX employment, could severely limit their effectiveness if they tried to testify on Bankman-Fried’s behalf in Garrison or Lam.

A major focus of the criminal charges is that FTX, through its ringleaders, siphoned billions of dollars from FTX, in part to related entities in a fruitless attempt to prop up those companies. The admission of serious criminal misdeeds at FTX by some of those very ringleaders will greatly benefit the plaintiffs in Garrison and Lam as it proves their point, beyond a doubt and in advance of a trial that FTX was essentially defrauding its shareholders.


Given the number of civil cases filed against FTX for similar reasons, it seems appropriate for the judicial panel on multidistrict litigation to consolidate the various cases, and this in turn would set off a scramble among plaintiffs’ counsel to be named lead attorneys. 

The Fall of the House of FTX is barely four months old, and already teams, owners, athletes, and an arena have been severely, financially injured by the collapse, and that is before any of the civil cases really begin. For Kraft and Brady, beneficiaries of the NFL’s infamous “Fumblegate” call, there are football fans to whom the phrase “karma delayed” will come to mind. Many major law firms are already involved in the current cases, and more will likely join the parade. One can only begin to imagine how much of what remains at FTX and the individual defendants will be spent in attorney’s fees and subsequent damages. 

If Garrison does not settle, one can anticipate an overflowing court room when Boies cross examines, Brady, Curry, and the other sports-related brand ambassadors. This time around, the officiating judge is unlikely to protect Brady from his fumbles, nor will Curry have a home-court advantage. He may enjoy running up the basketball court, but he may find out that he can’t outrun the long arm of the law. The public will see if Curry, Brady and the other “brand ambassadors” can handle the truth on the witness stand. 

After the sinking of the once titanic FTX, Bankman-Fried tweeted that he was “overconfident” and “careless” with FTX’s (billions) of dollars. Garrison includes pages of his Tweets, including several times admitting that he “f…ed up.” No one will dispute that. Tweets are relatively new as evidence in litigation, but FTX is a groundbreaking entity. Most athletes have relatively short careers and should spend and invest wisely. FTX now teaches that clubs and athletes going forward must endorse wisely.

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