Lawyer Behind FTX Lawsuit Weighs in on Celebrity Endorsements

A group of celebrities involved with the FT with FTX are being sued in a class action lawsuit. Basketball star Shaquille o'neal is one of those celebrities, but until recently he could not be served. Joining us now is Adam Moskowitz, managing partner at the Moskowitz law firm who is representing FTX investors. Adam. Welcome. Good morning. Welcome. All right, let's start off by talking about what happened Tuesday night. Give us a recount of the events. All right, there's so much going on almost on a daily basis. The Shaquille o'neal story is silly. It's actually a side story which we, we wish we didn't have to deal with because it's costing us over $100,000 to just serve the guy. And it's sort of, it's unheard of because most celebrities want their lawyer to just accept the service of process and it's over. That's the way it's been done with all the FTX celebrities, but Shaquille didn't want to. So on Tuesday night, we knew he'd be at the game, we knew he'd be at our arena and we've had many people calling, complaining about other crypto NFT scams which he's been involved with and we filed a new class action for Astros against Mr o'neill. So we had somebody go into the game and serve him with both complaints. Why has Shaq been so good at dodging these process servers? Like in your opinion, what has made him uniquely tricky to pin down? This is a very public and very large man out there in the world on TV, all the time. Why does it cost you so much money to serve him? His papers? It's crazy. And that's a great question. When you sue a corporation, I can just send the complaint to the registered agent, right? So, so any, any corporation is easy to serve, right? So you don't serve individuals that often when you do, they have lawyers like Tom Brady did. And those lawyers typically will say, just send me the complaint, they get an extra 30 days, the lawyer that's representing Shaquille o'neal, he represents two other defendants in our case. And he said, of course, just don't serve them personally, just send it to me. So I have no idea why did Shaquille o'neal tell him not to accept it. And with his security team, he has enough money to keep security guards 24 hours a day. So he can sort of physically be away from anybody trying to serve him. And it sort of, it never happens in any of these cases ever because they're going to get him eventually, you know, and we got him. But maybe it became a gimmick for him. Maybe it became and he's an officer of the law. He's a deputy, he's a deputized officer and we actually sent money to his police department to serve him. So I have no idea what his end game was, but it's extremely extraordinary that these facts ever happened. You, you brought up the Astros case, the other class action, you're representing people in who are suing Shaq for his NFT project claiming that they are unregistered security regulators in the US. Haven't said NFTS are, are um a security. Can you tell us bit about the basis of the case? Yeah. You know, we've been called by a lot of these celebrities who say they have nothing to do with crypto. And then sure enough, we find out they're making a lot more money promoting other deals. This Astros deal was really strange because Shaquille o'neal, Shaquille did it with his son who was the head of investor relations and his business partner. So every day they're going on to the internet, posting their icons talking to the group saying I'm always going to be there for you. The value of your avatars are going to go up because I'm Shaquille o'neal. You can come to my DJ Diesel concerts and I'm going to live in your meta universe. It's crazy. And then all of a sudden when F TX hit, he was gone and they freaked out, you know, they didn't want this lawsuit because it then makes the value of their avatars less. But after a couple of months, what are they going to do after the first week he was missing, he posted a meme of Leonardo Dicaprio and it said I ain't fing going anywhere, he hasn't been heard of in 2.5 months. So these people had no other choice and we said we will take him on and if he's going to avoid us and avoid them, you know, so be it, bring it on Shaq. I mean, you don't see any of these people on any of the TV shows. Where's a single celebrity for the past year? Get on your show and say what I did wasn't wrong. They can't because these are unregistered securities and they did promote them. So the only defense they have is basically either don't catch us or there's no jurisdiction over the court, right? So if you're a California resident and I sue you in Florida, they'll say no jurisdiction. Well, yesterday, we had a multi district litigation panel hearing in Philadelphia and those judges are going to decide if all the F TX cases go to one or two locations. If that happens. There's no jurisdictional arguments because there's nationwide jurisdiction. So I don't know what Tom Brady and Shaquille are going to say if their argument of there's no jurisdiction applies because we know that these are unregistered securities sec has said the tokens are unregistered. Nobody is saying they're not. And did they promote them? Of course, they did. So I think we're getting closer to a recovery for all of the victims for Voyager FTX and then eventually Binance. Interesting, Mr Moskowitz, why do you think that celebrities that promoted FTX like Shaq and Tom Brady should be held liable for that? In an interview with C NBC back in December, Shaq said that essentially he was just a paid spokesperson for a commercial and that seems pretty different than say, Kim Kardashian promoting Ethereum Max on social media without disclosing that it was a paid endorsement. It seems like the paid nature of that endorsement is implied when it comes to something like FTX and nobody accused FTX trading on it of being some sort of restricted activity. So, I mean, what's, what's kind of the thinking here of how these dots connect? Oh, absolutely. And it's crystal clear in 2017, we're talking six years ago, the SEC wrote to celebrities. It was an open letter and it said we know some of you like Kim Kardashian and DJ Khaled and Floyd Mayweather are starting to promote crypto products. If we aside the SEC that these are unregistered securities and you're a celebrity and you're promoting them, you will be held liable. You could be held liable for promoting an unregistered security and under the FTA and FDC rules that if you don't disclose how much you're getting in compensation. That's also a violation. And that was Paul Pierce about three weeks ago. He was sued and settled with the SEC because he said he was promoting it. But he never said the amount, you know, they treat investments. Obviously an unregistered security is an illegal security. So the laws are very strict. You're not just a paid spokesperson. If you promote an illegal product, you are liable. It's that simple. And here because F TX was based in Florida, we're using the Florida securities law for everyone in the country. And that securities law is crystal clear. If you promote an unregistered product, you are liable. There's no defense that. Oh, I was just a paid spokesperson. Why didn't Shaquille o'neal look into this? Why didn't he ask one question? Are these unregistered securities? I mean, everybody knows today that these tokens are non registered securities. There's no dispute today. I wanna, I wanna go back to the NFT question because I think we started talking about NFTS and then we, we're talking about tokens. So I want to separate them the class action for the NFT project. You're saying these are securities, but we haven't heard the SEC come out and give us definitively language about NFTS being securities. So can, can you just tell us how you're thinking about that? How can you say that they are securities? Yeah. Good question. I mean NFT started as pieces of art, you know, electronic pieces of art and that's what they were supposed to be. So it's a harder question and it's something we're gonna have to develop. But when you look at an NFT, you look at the, how we test, that's the Supreme Court test saying is something a security or not. And basically, it's, if I buy it and it goes up and down based upon the efforts of others, then that's a security. So with Astros, that's exactly what they said. They said you can buy this NFT and it's gonna go up or down based upon the efforts that Shaq does mainly in promoting these products. I mean, why is his son fault? Why is his son called quote the investor relations? Think about that. I mean, that's kind of illogical. You don't have an investor relations in a company unless you have securities, unless you have investors. So there was pretty much no discussion that these products weren't going to be treated like secure, they're going to go up and down in value based on the efforts of others. So while some NFTS may not be securities, I agree. And this is a new area that the SEC is just getting into. When you look at the facts of this particular NFT. There's no doubt in our mind that it is a security. So going back to the FTX case, uh you know, so Chair Gensler has said everything other than Bitcoin looks kind of like a security has yet to distinguish which ones are included in that statement including e the native asset of Ethereum, which is the second largest Cryptocurrency by market cap. Wouldn't specify that. So, are you asking the judges in these class action cases to apply the, how we tests to the various assets that were listed on FTX? And then if that's determined that those including Bitcoin were a security, then Shaq in this instance would be guilty of the alleged violation. Is that what you guys are asking the judges to do? Good question? We're asking the judges to declare whatever we need in the most narrow sense to be a security. We don't need all of the products that are offered by F So he, every person who invested in FTX, every person automatically got put into the interest account, right? The, the YB A because it was based on Bitcoin, it goes up and down. So our question is, are those interest accounts, all of them a security? You don't have to look at all the individual tokens you just have to see is that interest account a security? The answer is, is it is because the SEC wrote to block five F TX, Voyager and coin base and said, we think these interest accounts are securities. So stop selling them. So coin base stopped block five, paid $100 million fine. FX went bankrupt and Voyager went bankrupt. So we're not asking for everything. We're just asking the court to interpret are these interest bearing accounts for Binance FX and Voyager quote securities under the Howie test. We're not asking for more than that. And last week, Judge Moore in our FX case allowed us to file an amended complaint which has 200 more pages because we found so much more evidence. And we have Dan Friedberg who is the former chief compliant officer of FTX, helping us, he's settling with the case and he's giving us information, which is helping us prove the claim like that their Miami office all the way back to 2011 organized all of the ambassador celebrity program because they wanted to bring people to the Miami Arena and see the FTX sign because their local guy, Avi Dresner, who ran their office that gives us immediate credibility by just visually seeing the FTX arena. That's why Miami was the focal point. But yesterday, we had an MD L hearing and some of these cases may be transferred to California. There's a great judge quarterly and she may handle maybe the hedge funds like Sequoia and the banks and maybe the judges in Miami will handle the insiders and the promoters, but we'll know in the next week. So things are moving quickly. All right, Adam, we're gonna have to leave it there. Thank you very much for joining us. We'll have to just wait and see what happens with both of those class action lawsuits. We should also note that Coindesk reached out for comment from Shaquille o'neal and the Center but did not hear back from either party.