Far-reaching fallout has come as a result of the massive implosion of FTX, a crypto giant. The now-bankrupt platform was endorsed by numerous celebrities who have now found themselves in the middle of controversy. Internal Revenue Service tax attorneys acknowledged the failure of FTX, even as new loans and redemptions were suspended by Genesis, the crypto brokerage’s lending arm. These suspensions followed an unusually high number of withdrawal requests, the latter of which exceeded the company’s liquid assets.
According to a tax attorney in San Jose, Genesis stated that representatives were working tirelessly to come up with solutions. Based on information on Genesis’ website, the third quarter showed approximately $2.8 billion in active loans.
Problems Arise for Famous Sports Personalities and Other Celebrities
The entire crypto industry remains on the edge of its seat after the Alameda Research hedge fund and Sam Bankman-Fried’s FTX exchange filed for bankruptcy last week. Shortly after suspending withdrawals, the company warned consumers of delayed redemptions. Naturally, major players in the crypto industry are hurrying to separate themselves from firms such as FTX, but token prices have slumped anyway. Interestingly, certain celebrities found themselves in the middle of problems they likely hadn’t anticipated from the unraveling of FTX.
Tom Brady and Gisele Bundchen Named in Lawsuit
Last week, in a proposed class-action lawsuit, Bankman-Fried was sued by an FTX investor who also sued a handful of celebrities who had given endorsements for the platform. These include Tom Brady, Gisele Bundchen, and Steph Curry. Stated in the proposed suit were allegations that FTX entities were essentially a house of cards and that the FTX platform was deceptive. The suit was filed on behalf of FTX customer Edwin Garrison by high-profile lawyers David Boies and Adam Moskowitz. Boies was the attorney for Vice President Al Gore during the election battle between George W. Bush and Gore in 2000. Crypto tax attorneys for Brady, Bundchen, and Curry did not respond at once to a request for comment from CNN Business.
Moskowitz is also the cryptocurrency tax attorney in another class-action lawsuit that was filed against Voyager Digital, another platform that earlier this year filed for bankruptcy. Moskowitz referred to FTX as a major Ponzi scheme and likened it to the one run by Bernie Madoff in an email to CNN Business. Moskowitz claimed that without the help of celebrity endorsements, FTX would not have been successful.
Crypto tax attorneys who have no involvement in the FTX case told CNN that whether or not cryptos can be treated as securities is a question likely to come up during the case. Cornell Law School professor Charles Whitehead stated that celebrities who are running around doing such endorsements should pause and ask security lawyers first. Whitehead is not involved in the case, but made his opinion clear that this type of sponsorship is not the same as selling sneakers.
Growing Demand for Better Crypto Regulation
Congress has been called to take action in the cryptocurrency market, since guidelines for traders are vague and the industry is largely unregulated. Policymakers, regulators, and crypto industry leaders themselves have publicly demanded such regulation.
Brian Armstrong, the CEO of Coinbase, said on Wednesday that crypto is not going away, and that the entire platform should not be undermined by one bad player. He stated that what happened may work in favor of companies such as his in the long run.
It is unclear how fast regulations may be put into place with regard to crypto trading. IRS tax attorneys are ultimately the best individuals to speak to when making any major financial decision that could eventually lead to the fallout described above.