The FTX collapse that is ballooning into arguably the biggest financial story of 2022 is worsening for Tom Brady, Steph Curry and other major endorsers of the now-bankrupt cryptocurrency platform.
The director of enforcement for the Texas State Securities Board has announced that state regulators are investigating multiple celebrity endorsers tied to the FTX trading platform. The probe is an an effort to determine whether securities laws were violated by Brady, Curry and others while promoting FTX and cryptocurrency.
Texas regulators have begun corresponding with securities regulators in other states, and that parallel state investigations into celebrity endorsers could be announced in the coming weeks or months, a source familiar with the investigation told Yahoo Sports on Tuesday.
“The expectation is there will likely be a comprehensive review by many regulators across the country, depending on what securities or consumer protections might apply in other states,” the source said. “[Texas] isn’t likely to stand alone.”
Asked whether state probes could be the first steps toward an eventual federal securities investigation involving Brady and other celebrity endorsers, the source added, “That’s certainly not anything the state of Texas can influence, but it’s sensible that what is happening with FTX will occupy the attention of federal regulators at the appropriate time.”
The scrutiny of Texas state regulators comes in the wake of the trading platform collapsing earlier this month, which included freezing billions of dollars in customer accounts while founder Sam Bankman-Fried moved the company into bankruptcy protection. The total asset losses by FTX customers are still unknown, although various reports have pegged the platform’s financial shortfall at $8 billion to $12 billion — or possibly much more. A handful of hedge funds that were invested in the platform have already notified investors of potential losses, including venture capital fund Sequoia Capital, which reportedly apologized to its partners this week for $150 million in anticipated losses tied to FTX.
What all of this means for Brady, Curry and a swath of other celebrity endorsers is still taking shape. But the director of enforcement for the Texas State Securities Board, Joe Rotunda, told Bloomberg this week that payments and equity received by Brady and others will be under the microscope, including their disclosures and agreements with the company. At the heart of the review for regulators — both state and federal — will be what aspects of the FTX exchange qualify as “securities,” making them applicable to various securities laws. Historically, securities violations involving endorsers are subject to potentially significant financial fines rather than criminal convictions involving jail time.
This latest round of scrutiny comes on the heels of a class-action lawsuit filed last week against FTX, Bankman-Fried and the platform’s multitude of endorsers.