FTX Investors Sue Bankman-Fried Over Yield-Bearing Crypto Accounts (Report)

FTX investors have sued the company’s ex-CEO Sam Bankman-Fried for illegally offering yield-bearing crypto accounts at the now insolvent exchange. 

• The lawsuit, filed in Miami on Tuesday, alleges that FTX’s crypto-yield-bearing accounts were unregistered securities illegally sold in the U.S, according to Reuters. 
• Now that the exchange has failed to honor withdrawals, investors claim to have sustained $11 billion in damages. 
• The lawsuit also seeks damages from numerous celebrities who were involved with promoting FTX, such as Tennis Star Naomi Osaka and NFL quarterback Tom Brady. Many high-profile athletes and teams have been rushing to cut ties with the firm over the past week, including the Golden State Warriors.
• Multiple crypto lenders have been targeted by state securities regulators this year for offering unregistered crypto yield products, including Nexo. The Securities and Exchange Commission (SEC) stopped Coinbase from listing a similar product in September 2021. 
• SEC Chairman Gary Gensler has expressed suspicion over the unusually high yields such crypto accounts frequently offer. “How does somebody offer (such a large percentage of returns) in the market today and not give a lot of disclosure?” he asked at the RFK Human Rights Compass Summer Investors Conference in June. 
• The SEC and CFTC are reportedly investigating FTX for suspected embezzlement of $10 billion in client assets to SBF’s trading company Alameda Research. 
• Bankman-Fried is now seeking billions from investors to help plug an $8 billion hole in its balance sheet.