The National Basketball Association was hit with a lawsuit over its marketing links to failed crypto exchange Voyager Digital Holdings Inc., which investors claim led to $4.2 billion in losses.
The NBA was “grossly negligent” in agreeing to a marketing deal between Voyager and Mark Cuban, the former owner of the NBA’s Dallas Mavericks, the investors alleged in a suit filed Tuesday in Miami. The investors previously sued Cuban for promoting the exchange, which they called “an unregulated and unsustainable fraud” after its collapse in 2022.
Several NBA teams had marketing deals with crypto firms, including the failed FTX exchange, whose founder Sam Bankman-Fried was convicted of fraud. The Commodity Futures Trading Commission has sued Voyager co-founder Stephen Ehrlich, claiming he “fraudulently solicited participation in and operated a digital asset trading and custody platform.” Ehrlich said at the time he was being used as a “scapegoat for the bad actions of others.”
“The NBA’s widespread promotion of Voyager’s unregistered securities renders it liable for any and all resulting damages,” the investors claimed. The investors also named as defendants Voyager’s attorneys, McCarter & English, saying the firm “produced fraudulent legal opinions and participated” in the alleged conspiracy to push the crypto exchange.
McCarter & English, in a statement Wednesday, said it intends to “vigorously defend the firm, which provided clear and competent advice to our clients.”
Rick Buchannan, the NBA’s general counsel, didn’t immediately return calls seeking comment on the suit.
Marketing Crypto
The collapse of FTX in 2022 sparked lawsuits against celebrities who endorsed investing in the crypto market, including sports stars Tom Brady and Steph Curry and comedian Larry David. Some have settled, including Kim Kardashian and National Football League quarterback Trevor Lawrence.
Cuban signed a five-year partnership deal with Voyager in 2021, making its token the official Mavericks cryptocurrency and displaying Voyager ads in its American Airlines Center in Dallas for the 2021-2022 season. The NBA’s Miami Heat had a similar deal with FTX, naming their arena after the crypto exchange.
In a separate suit filed in 2022, the investors accused Cuban of defrauding them by misrepresenting the safety of Voyager. Cuban, who has called the claims “utterly baseless,” sold his majority stake in the Mavericks in December for $3.5 billion to the Adelson and Dumont families, who run Las Vegas Sands Corp. The investors are targeting proceeds from the sale to satisfy their damage demands.
Voyager filed for Chapter 11 protection from creditors in 2022 and a judge authorized the firm to liquidate assets to repay customers a portion of their crypto that’s been held on its platform.
Voyager investors accuse the NBA of seeking to take the lead in crypto promotions by backing the firm and FTX. “This decision, fraught with risk, involved promoting and selling billions of dollars in unregistered and illegal securities to the public, by leveraging the global reputation and trust in the NBA brand,” according to the suit.
McCarter’s attorneys stepped over the line by lending their credibility as a respected law firm to Voyager in issuing “a bogus legal opinion that concluded Voyager’s VGX token was not an unregistered security,” the suit added.