(NewsNation) — Some of the biggest names in sports and entertainment, including NFL quarterback Tom Brady and the NBA’s Steph Curry, are under investigation by a Texas regulator for possible violations of securities laws in connection to cryptocurrency exchange FTX.
Joe Rotunda, director of enforcement at the Texas State Securities Board, told Bloomberg the board is reviewing payments received by the celebrities to endorse FTX, as well as disclosures they made and how accessible they were to retail investors.
NewsNation partner The Hill reports that this investigation comes a week after an investor filed a class-action lawsuit against FTX, its former CEO Sam Bankman-Fried and other celebrities for their cryptocurrency endorsements. The investor alleges that people named in the suit made “misrepresentations and omissions” that ultimately led to him to invest in the company, costing him and others millions of dollars.
The lawsuit alleges FTX investors lost at least $11 billion in damages.
FTX filed for bankruptcy earlier this month, and Bankman-Fried resigned, after a market crash caused investors to collectively lose billions. The troubles came to light when rival crypto firm Binance swooped in to rescue FTX, but then pulled out and liquated all their holdings in the exchange. The U.S. Securities and Exchange Commission and Justice Department are investigating, the Wall Street Journal reported.
Scrutiny from state-level financial authorities is usually less high-profile than an investigation by the SEC, Bloomberg notes, but the investigation in Texas could still lead to significant fines.
Rotunda, per Bloomberg, is communicating with other states as it digs into the FTX issues. He said he doesn’t know whether the SEC is probing celebrity endorsements as well.
The SEC declined to comment to Bloomberg, and so far, the celebrities involved in the lawsuit and investigation have not commented either.
Federal Defense Attorney Ronald Chapman said on “Morning in America” that there are “three buckets of liability” the celebrities’ involvement in FTX could fall under: administrative liability, civil liability, which can result in significant fines, and criminal liability.
“I don’t know if Tom Brady and these celebrities would be considered criminally liable,” Chapman said. “But Texas and the federal government do have the ability to pursue false and misleading statements made by promoters of securities where they knew that those statements were false.”
“I think the real question is, who is going to be the first entity to move forward with allegations, charges or fines? And who’s gonna have to sit and wait,” Chapman added.