Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 1 of 41
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
`MIAMI DIVISION
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`CASE NO.
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`EDWIN GARRISON, et al., on behalf of
`themselves and all others similarly situated,
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`Plaintiffs,
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`v.
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`SAM BANKMAN-FRIED, et al.,
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`Defendants.
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`CLASS ACTION COMPLAINT
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`JURY DEMAND
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` CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL
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`“Then there’s things that have happened with Voyager and with FTX now—that’s somebody
`running a company that’s just dumb as fu** greedy. So, what does Sam Bankman do? He
`just, give me more, give me more, give me more, so I’m gonna borrow money, loan it to my
`affiliated company, and hope and pretend to myself that the FTT tokens that are in there on
`my balance sheet are gonna sustain their value.”1
`
`– Mark Cuban, Nov. 12, 2022
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`
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`– Defendant Sam Bankman Fried (Former CEO, FTX)
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`1 https://www.yahoo.com/video/ftx-twitter-chaos-embarrassing-athletes-195343800.html (accessed
`November 15, 2022).
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 2 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`Plaintiff Edwin Garrison (“Plaintiffs”) files this class action complaint on behalf of himself,
`and all others similarly situated, against Sam Bankman-Fried, Tom Brady, Gisele Bundchen, Stephen
`Curry, Golden State Warriors, Shaquille O’Neal, Udonis Haslem, David Ortiz, William Trevor
`Lawrence, Shohei Ohtani, Naomi Osaka, Lawrence Gene David, and Kevin O’Leary (collectively,
`“Defendants”), all parties who either controlled, promoted, assisted in, and actively participated in
`FTX Trading LTD d/b/a FTX’s (“FTX Trading”) and West Realm Shires Services Inc. d/b/a FTX
`US’s (“FTX US”) (collectively, the “FTX Entities”), offer and sale of unregistered securities in the
`form of yield-bearing accounts (“YBAs”) to residents of the United States, seeking to recover
`damages, declaratory and/or injunctive relief stemming from the offer and sale of FTX Trading’s and
`FTX US’s yield-bearing cryptocurrency accounts.2
`INTRODUCTION
`1.
`The Deceptive and failed FTX Platform was based upon false representations and
`deceptive conduct. Although many incriminating FTX emails and texts have already been destroyed,
`we located them and they evidence how FTX’s fraudulent scheme was designed to take advantage of
`unsophisticated investors from across the country, who utilize mobile apps to make their investments.
`As a result, American consumers collectively sustained over $11 billion dollars in damages. FTX
`organized and emanated its fraudulent plan from its worldwide headquarters located here in Miami,
`Florida. Miami became the “hot spot” for crypto companies, hosting the most investments in crypto
`startups as well as the annual Bitcoin Miami 2022 Global Forum. Several crypto companies, including
`crypto exchange Blockchain.com, Ripple and FTX.US, moved their headquarters to Miami. Others,
`including fellow exchange eToro, expanded their U.S. presence with offices in Miami. FTX was already
`very familiar with Miami, signing a deal worth more than $135 million dollars for the naming rights of
`the waterfront arena, where 3-time NBA Champions the Miami Heat play.
`FACTUAL BACKGROUND
`2.
`On December 24, 2021, counsel for Plaintiff and the proposed class members brought
`the first (and only) putative nationwide class action complaint against the now-defunct cryptocurrency
`trading app, Voyager, styled Mark Cassidy v. Voyager Digital Ltd., et al., Case No. 21-24441-CIV-
`
`
`Undersigned Counsel represents many hundreds of injured Voyager investors in the related
`2
`action against Mark Cuban and the Dallas Mavericks, styled Pierce Robertson, et al., v. Mark Cuban, et al.,
`No. 22-CV-22538-ALTMAN/REID (S.D. Fla.), currently pending before the Honorable Federal
`Judge Roy Altman here in the Southern District of Florida, and have been following these FTX events
`as they unfolded very closely. Moreover, discovery has yet to commence, but Plaintiff’s counsel
`anticipates adding additional responsible parties as Defendants.
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`2
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 3 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`ALTONAGA/Torres (the “Cassidy Action”), alleging that the platform owned and operated by
`Voyager Digital Ltd. (“Voyager”) and Voyager Digital LLC (“VDL”) was an unregulated and
`unsustainable fraud. In the Cassidy Action, Plaintiffs also alleged that Defendant Ehrlich, Voyager’s
`CEO, teamed up with Defendants Cuban and the Dallas Mavericks to promote Voyager, by making
`false representations and employing other means of deception. As a result, the Voyager plaintiff and
`Voyager class members, all sustained losses in excess of $5 billion.
`3.
`The allegations in the Cassidy complaint—and specifically Mark Cuban’s role in
`promoting Voyager—received national attention. See https://www.jdsupra.com/legalnews/new-
`lawsuits-target-cryptocurrency-9604406/ (summarizing the allegations and explaining that “Mark
`Cuban, owner of the NBA’s Dallas Mavericks, is a major stakeholder in Voyager. The complaint
`alleges that he made comments at a press conference in which he specifically targeted unsophisticated
`investors ‘with false and misleading promises of reaping large profits in the cryptocurrency market.’”);
`https://www.law.com/dailybusinessreview/2021/12/29/mark-cuban-linked-crypto-platform-hit-
`with-florida-nationwide-class-action-lawsuit-in-miami-federal-court/?slreturn=20220701214901
`(same, in the Daily Business Review).
`4.
`After the Cassidy Complaint was filed, the following important actions took place:
`
`(a)
`
`(b)
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`the United States Securities and Exchange Commission (SEC) began
`an enforcement review focused on whether Voyager’s Earn Program
`Accounts (“EPAs”) constitute unregistered securities;
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`seven state Attorneys General (New Jersey, Alabama, Kentucky,
`Oklahoma, Texas, Vermont and Washington) took specific action
`finding that Voyager was violating their state laws, including issuing
`“cease and desist” letters to Voyager, finding that the EPA was an
`unregistered security, prohibiting the crypto-asset broker-dealer from
`selling any more unregistered securities (finding that Voyager used
`these EPAs to raise millions of dollars in revenue worldwide as of
`March 1, 2022; and
`
`(c)
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`on March 29, 2002, the State of New Jersey Bureau of Securities
`entered a Cease and Desist Order against Voyager, finding that the
`EPA was not exempt from registration under the law, and instead that
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`3
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 4 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`it must be registered—and as a result, Voyager’s stock price tanked by
`25% in a day and is down over 80% for the year.3
`
`5.
` On July 5, 2022, Voyager Digital Holdings, Inc. and two affiliated debtors
`(collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of Title 11 of the
`United States Code. Voyager’s bankruptcy cases (the “Voyager Bankruptcy Cases”) are jointly
`administered under Case No. 22-10943 before the Honorable Michael E. Wiles in the United States
`Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).
`6.
`On September 28, 2022, Voyager filed a motion in the Voyager Bankruptcy Cases
`seeking authority to enter into an asset purchase agreement with West Realm Shires Inc., d/b/a FTX
`US whereby Voyager will sell substantially all of its assets for a purchase price of approximately $1.422
`billion, which includes (i) the value of cryptocurrency on the Voyager platform as of a date to be
`determined, which, as of September 26, 2022, is estimated to be $1.311 billion, plus (ii) additional
`consideration which is estimated to provide at least approximately $111 million of incremental value
`to the Debtors’ estates.
`7.
`Everyone involved in the Voyager Bankruptcy Cases thought that the FTX Entities
`were the deus ex machina come to save the day by bailing out Voyager and paying back at least some of
`the losses the Voyager customers sustained.
`8.
`Instead, as explained below, the FTX Entities imploded, their over $30 billion in value
`evaporated almost overnight, and the FTX Entities found themselves filing their own emergency
`Chapter 11 bankruptcy petition in Delaware. The Deceptive FTX Platform maintained by the FTX
`Entities was truly a house of cards, a Ponzi scheme where the FTX Entities shuffled customer funds
`between their opaque affiliated entities, using new investor funds obtained through investments in the
`YBAs and loans to pay interest to the old ones and to attempt to maintain the appearance of liquidity.
`9.
`Part of the scheme employed by the FTX Entities involved utilizing some of the
`biggest names in sports and entertainment—like these Defendants—to raise funds and drive
`American consumers to invest in the YBAs, which were offered and sold largely from the FTX
`Entities’ domestic base of operations here in Miami, Florida, pouring billions of dollars into the
`Deceptive FTX Platform to keep the whole scheme afloat.
`
`
`3 https://seekingalpha.com/article/4498956-voyager-digital-plunged-25-percent-heres-why (accessed
`October 28, 2022); https://seekingalpha.com/article/4503716-voyager-digital-buy-dip-during-
`crypto-crash (accessed November 15, 2022).
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`4
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 5 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`10.
`Importantly, although Defendants disclosed their partnerships with the FTX Entities,
`they have never disclosed the nature, scope, and amount of compensation they personally received in
`exchange for the promotion of the Deceptive FTX Platform, which the SEC has explained that a
`failure to disclose this information would be a violation of the anti-touting provisions of the federal
`securities laws.4 Moreover, none of these defendants performed any due diligence prior to marketing
`these FTX products to the public.
`11.
`The SEC took action against boxing champ Floyd Mayweather and music producer
`DJ Khaled after they were paid by cryptocurrency issuers to tweet promotional statements about
`investing in Initial Coin Offerings (ICOs), ordering them both to pay disgorgement, penalties and
`interest for promoting investments in ICOs, including one from cryptocurrency issuer Centra Tech,
`Inc, for a combined total of $767,500 because they failed to disclose that their promotional efforts on
`Twitter were paid endorsements.5
`12.
`Other celebrities similarly accused and prosecuted for failing to disclose their paid
`endorsements include Kim Kardashian and basketball player Paul Pierce.6 According to the Federal
`Trade Commission, cryptocurrency scams have increased more than ten-fold year-over-year with
`consumers losing more than $80 million since October 2020, due in large part to the use of such
`celebrity endorsements. 7
`13.
`As explained more fully in this Complaint, Defendants’ misrepresentations and
`omissions made and broadcast around the country through the television and internet render them
`liable to Plaintiff and class members for soliciting their purchases of the unregistered YBAs. Wildes v.
`Bitconnect Int’l PLC, No. 20-11675 (11th Cir. Feb. 18, 2022) (holding that promoters of cryptocurrency
`through online videos could be liable for soliciting the purchase of unregistered securities through
`mass communication, and no “personal solicitation” was necessary for solicitation to be actionable).
`
`
`https://www.ubergizmo.com/2017/11/sec-celebrities-disclose-payment-cryptocurrency-
`4
`endorsements/#:~:text=It%20has%20issued%20a%20statement%20warning%20celebrities%20tha
`t,without%20disclosing%20that%20they%E2%80%99ve%20been%20paid%20for%20it
`(accessed
`November 15, 2022).
`5
`https://news.bloomberglaw.com/us-law-week/insights-celebrity-endorsements-and-
`cryptocurrency-a-cautionary-tale (accessed November 15, 2022).
`6
`https://blockbulletin.com/news/altcoins/kim-kardashian-among-other-celebrities-sued-for-
`promoting-cryptocurrencies/ (accessed November 15, 2022).
`7 https://florida.foolproofme.org/articles/770-celebrity-cryptocurrency-scam (accessed August 10,
`2022).
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`5
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 6 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`14.
`This action seeks to hold Defendants responsible for the many billions of dollars in
`damages they caused Plaintiff and the Classes and to force Defendants to make them whole.
`
`PARTIES
`15.
`Plaintiff Edwin Garrison is a citizen and resident of the State of Oklahoma. He is a
`natural person over the age of 21 and is otherwise sui juris. Plaintiff Garrison purchased an unregistered
`security from FTX in the form of a YBA and funded the account with a sufficient amount of crypto
`assets to earn interest on his holdings. Plaintiff Garrison did so after being exposed to some or all of
`Defendants’ misrepresentations and omissions regarding the Deceptive FTX Platform as detailed in
`this complaint, and executed trades on the Deceptive FTX Platform in reliance on those
`misrepresentations and omissions. As a result, Plaintiff Garrison has sustained damages for which
`Defendants are liable.
`16.
`Defendant Thomas Brady, NFL quarterback currently playing for the Tampa Bay
`Buccaneers, is a brand ambassador of FTX, and is a citizen and resident of Miami-Dade County,
`Florida.
`17.
`Defendant Gisele Bundchen, one of the world’s highest-paid models and a brand
`ambassador for FTX, is a citizen and resident of Miami-Dade County, Florida.
`18.
`Defendant Kevin O’Leary, “Mr. Wonderful,” a businessman, television personality
`appearing regularly on Shark Tank, and brand ambassador for FTX, is a citizen and resident of Miami
`Beach, Florida.
`19.
`Defendant Udonis Haslem, an American professional basketball player for the Miami
`Heat of the NBA and brand ambassador of FTX, is a citizen and resident of Miami-Dade County,
`Florida.
`20.
`Defendant David Ortiz, former designated hitter and first baseman in the MLB and a
`brand ambassador for FTX, is a citizen and resident of the State of Florida.
`21.
`Defendant Sam Bankman-Fried, founder and former CEO of FTX and former
`billionaire, is a citizen and resident of the Bahamas.
`22.
`Defendant Stephen Curry, professional basketball player for the Golden State
`Warriors of the NBA and brand ambassador for FTX, is a citizen and resident of the State of
`California.
`23.
`Defendant Golden State Warriors LLC is a professional basketball team in the NBA
`that officially launched their partnership with FTX in 2022 with the unveiling of the FTX logo on the
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 7 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`court at the Chase Center, and is a corporation operating and existing under the laws of the State of
`California.
`24.
`Defendant Shaquille O’Neal, former professional NBA basketball star, sports analyst,
`entrepreneur, and FTX brand ambassador, is a citizen and resident of Collin County, Texas.
`25.
`Defendant William Trevor Lawrence, the quarterback for the Jacksonville Jaguars of
`the NFL and a brand ambassador for FTX, is a citizen and resident of the state of Mississippi.
`26.
`Defendant Shohei Ohtani, a professional baseball pitcher, designated hitter and
`outfielder for the Los Angeles Angels of the MLB and a brand ambassador for FTX, is a citizen and
`resident of the State of California.
`27.
`Defendant Naomi Osaka, a professional tennis player and brand ambassador for FTX,
`is a citizen and resident of Beverly Hills, California.
`28.
`Defendant Lawrence Gene David, an American comedian, writer, actor, television
`producer, and FTX brand ambassador, is a citizen and resident of Los Angeles, California.
`JURISDICTION AND VENUE
`29.
`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §
`1332(d)(2)(A) because this is a class action for a sum exceeding $5,000,000.00, exclusive of interest
`and costs, and in which at least one class member is a citizen of a state different than the Defendants.
`30.
`This Court has personal jurisdiction against Defendants because they conduct business
`in Florida, and/or have otherwise intentionally availed themselves of the Florida consumer market
`through the promotion, marketing, and sale of FTX’s YBAs in Florida, which constitutes committing
`a tortious act within the state of Florida. Defendants have also marketed and participated and/or
`assisted in the sale of FTX’s unregistered securities to consumers in Florida. This purposeful availment
`renders the exercise of jurisdiction by this Court over Defendants permissible under traditional
`notions of fair play and substantial justice.
`31.
`Venue is proper in this District under 28 U.S.C. § 1391 because thousands of Class
`Members either reside in this District; Defendants engaged in business in this District; a substantial
`part of the events or omissions giving rise to the claims at issue occurred in this District; and because
`Defendants entered into transactions and/or received substantial profits from Class Members who
`reside in this District.
`32.
`All conditions precedent to the institution and maintenance of this action have been
`performed, excused, waived, or have otherwise occurred.
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`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 8 of 41
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`FACTUAL ALLEGATIONS
`
`A.
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`Background on FTX.
`33.
`Until seeking the protection of the Bankruptcy Court, the FTX Entities operated a
`multi-billion-dollar mobile application cryptocurrency investment service (the “Deceptive FTX
`Platform”) that placed cryptocurrency trade orders on behalf of users like Plaintiff and Class Members
`and offered interest bearing cryptocurrency accounts.
`34.
`The FTX group of companies (FTX Group or FTX) was founded in 2019 and began as an
`exchange or marketplace for the trading of crypto assets. FTX was established by Samuel Bankman-Fried, Gary
`(Zixiao) Wang and Nishad Singh, with operations commencing in May 2019. FTX was purportedly established
`in order to build a digital asset trading platform and exchange for the purpose of a better user experience,
`customer protection, and innovative products. FTX built the FTX.com exchange to develop a platform robust
`enough for professional trading firms and intuitive enough for first-time users.
`35.
`Prior to that, The Silicon Valley-born, MIT-educated Bankman-Fried, also known as SBF,
`launched his crypto trading firm, Alameda Research, in 2017,8 after stints in the charity world and at trading
`firm Jane Street.9
`36.
`The FTX.com exchange was extremely successful since its launch. This year around $15 billion
`of assets are traded daily on the platform, which now represents approximately 10% of global volume for crypto
`trading. The FTX team has grew to over 300 globally. Although the FTX Entities’ primary international
`headquarters is in the Bahamas, its domestic US base of operations is located in Miami, Florida.10
`37.
`FTX quickly became one of the most utilized avenues for nascent investors to
`purchase cryptocurrency. By the time FTX filed for bankruptcy protection, customers had entrusted
`billions of dollars to it, with estimates ranging from $10-to-$50 billion dollars.
`38.
`Bankman-Fried got rich off FTX and Alameda, with the two companies netting $350
`million and $1 billion in profit, respectively, in 2020 alone, according to Bloomberg.
`
`
`https://www.businessinsider.com/ftx-crypto-king-sam-bankman-fried-rise-and-fall-2022-11
`8
`(accessed November 15, 2022).
`9
`https://www.businessinsider.com/ftx-sbf-crypto-saga-explained-what-happened-what-it-means-
`2022-11?inline-endstory-related-recommendations= (accessed November 15, 2022).
`10
`https://www.coindesk.com/business/2022/09/27/crypto-exchange-ftx-is-moving-its-us-
`headquarters-from-chicago-to-miami/ (accessed November 15, 2022).
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`39.
`At his peak, Bankman-Fried was worth $26 billion. At 30, he had become a major
`political donor, gotten celebrities like the Co-Defendants in this action to vociferously promote FTX,
`and secured the naming rights to the arena where the NBA’s Miami Heat play.11
`40.
`In early November 2022, crypto publication CoinDesk released a bombshell report
`that called into question just how stable Bankman-Fried’s empire really was.12
`41.
`Bankman-Fried’s cryptocurrency empire was officially broken into two main parts:
`FTX (his exchange) and Alameda Research (his trading firm), both giants in their respective industries.
`But even though they are two separate businesses, the division breaks down in a key place: on
`Alameda’s balance sheet, which was full of FTX – specifically, the FTT token issued by the exchange
`that grants holders a discount on trading fees on its marketplace. While there is nothing per se
`untoward or wrong about that, it shows Bankman-Fried’s trading giant Alameda rests on a foundation
`largely made up of a coin that a sister company invented, not an independent asset like a fiat currency
`or another crypto. The situation adds to evidence that the ties between FTX and Alameda are
`unusually close.13
`42.
`After obtaining this information, Changpeng “CZ” Zhao, the CEO of Binance,
`decided to liquidate roughly $530 million-worth of FTT. Customers also raced to pull out, and FTX
`saw an estimated $6 billion in withdrawals over the course of 72 hours, which it struggled to fulfill.14
`The value of FTT plunged 32%, but rallied once again with Bankman-Fried’s surprise announcement
`on Tuesday, November 8th, that Binance would buy FTX, effectively bailing it out.15
`43.
`The next day, Binance announced that it was withdrawing from the deal, citing findings
`during due diligence, as well as reports of mishandled customer funds and the possibility of a federal
`investigation.16 The news sent FTT plunging even further — Bankman-Fried saw 94% of his net
`
`
`11 https://www.businessinsider.com/ftx-sbf-crypto-saga-explained-what-happened-what-it-means-
`2022-11?inline-endstory-related-recommendations= (accessed November 15, 2022).
`12 https://www.businessinsider.com/ftx-sbf-crypto-saga-explained-what-happened-what-it-means-
`2022-11?inline-endstory-related-recommendations= (accessed November 15, 2022).
`13
`https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-
`empire-blur-on-his-trading-titan-alamedas-balance-sheet/ (accessed November 15, 2022).
`14
`https://markets.businessinsider.com/news/currencies/ftx-6-billion-withdrawals-72-hours-sam-
`bankman-fried-binance-2022-11 (accessed November 15, 2022).
`15
`https://markets.businessinsider.com/news/currencies/ftx-6-billion-withdrawals-72-hours-sam-
`bankman-fried-binance-2022-11 (accessed November 15, 2022).
`16
`https://markets.businessinsider.com/news/currencies/ftx-crash-sec-cftc-probes-asset-liability-
`shortfall-6-billion-2022-11 (accessed November 15, 2022).
`
`9
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`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`worth wiped out in a single day.17 On November 11th, unable to obtain a bailout, FTX filed for
`Chapter 11 bankruptcy and Bankman-Fried resigned as CEO.18
`44.
`Following his resignation, Bankman-Fried issued a 22-tweet-long explanation of where
`he believed he and the FTX Entities went wrong:19
`
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`17 https://www.businessinsider.com/ftx-ceo-crypto-binance-sam-bankman-fried-wealth-wiped-out-
`2022-11 (accessed November 15, 2022).
`18
`https://markets.businessinsider.com/news/currencies/ftx-bankruptcy-sam-bankman-fried-ceo-
`crypto-binance-alameda-markets-2022-11 (accessed November 15, 2022).
`19 https://twitter.com/SBF_FTX/status/1590709189370081280 (accessed November 15, 2022).
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`45.
`According to a recent Reuters report, however, another explanation contributing to
`the precarious house of cards that was the Deceptive FTX Platform is that earlier this year, Bankman-
`Fried secretly transferred at least $4 billion in customer funds from FTX to Alameda without telling
`anyone, after Alameda was hit with a series of losses, and that the FTX entities lent more than half of
`its $16 billion in customer funds to Alameda in total, with more than $10 billion in loans
`outstanding.20
`B.
`FTX’s offer and sale of YBAs, which are unregistered securities.
`46.
`Beginning in 2019, the FTX Entities began offering interest-bearing cryptocurrency
`accounts to public investors. Plaintiff and other similarly situated individuals invested in FTX’s YBAs.
`47.
`FTX maintains that it does not offer for sale any product that constitutes a “security”
`under federal or state law. Under federal securities laws as construed by the United States Supreme
`Court in its decision SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and by the SEC, an investment
`contract is a form of security under United States securities laws when (1) the purchaser makes an
`investment of money or exchanges another item of value (2) in a common enterprise (3) with the
`reasonable expectation of profits to be derived from the efforts of others.
`48.
`The YBAs were “securities” as defined by the United States securities laws and as
`interpreted by the Supreme Court, the federal courts, and the SEC. The FTX Entities offered variable
`interest rewards on crypto assets held in the YBAs on the Deceptive FTX Platform, which rates were
`determined by the FTX Entities in their sole discretion. In order to generate revenue to fund the
`promised interest, the FTX Entities pooled the YBA assets to engage in lending and staking activities
`from which they derived revenue to pay interest on the YBAs. These activities make the YBAs a
`“security” under state and federal law.
`
`
`https://markets.businessinsider.com/news/currencies/ftx-crash-client-funds-alameda-binance-
`20
`sbf-sec-cftc-probe-2022-11?utm_medium=ingest&utm_source=markets (accessed November 15,
`2022).
`
`16
`
`

`

`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 17 of 41
`
`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`49.
`On October 14, 2022, Director of Enforcement of the Texas State Securities Board,
`Joseph Rotunda, filed a declaration in the Chapter 11 bankruptcy proceedings pending in connection
`with the collapse of the Voyager Digital cryptocurrency exchange, In re: Voyager Digital Holdings, Inc., et
`al., Case No. 22-10943 (MEW), ECF No. 536 (Bankr. S.D.N.Y. Oct. 14, 2022), in which he explained
`how the YBAs are in fact “an offering of unregistered securities in the form of yield-bearing accounts
`to the residents of the United States.” Id., at 6. In his declaration, the pertinent portions of which are
`reproduced in full for ease of reference, Rotunda explains:
`I am also familiar with FTX Trading LTD (“FTX Trading”) dba FTX as described
`herein. As more fully explained throughout this declaration, I am aware that FTX Trading,
`along with West Realm Shires Services Inc. dba FTX US (“FTX US”), may be offering
`unregistered securities in the form of yield-bearing accounts to residents of the United States.
`These products appear similar to the yield-bearing depository accounts offered by Voyager
`Digital LTD et al., and the Enforcement Division is now investigating FTX Trading, FTX US,
`and their principals, including Sam Bankman-Fried.
`I understand that FTX Trading is incorporated in Antigua and Barbuda and
`headquartered in the Bahamas. It was organized and founded in part by Mr. Bankman-Fried,
`and FTX Trading appears to be restricting operations in the United States. For example,
`domestic users accessing the webpage for FTX Trading at ftx.com are presented with a pop-up
`window that contains a disclaimer that reads in part as follows:
`Did you mean to go to FTX US? FTX US is a US licensed
`cryptocurrency exchange that welcomes American users.
`You’re accessing FTX from the United States. You won’t be able to use
`any of FTX.com’s services, though you’re welcome to look around the site.
`FTX US claims to be regulated as a Money Services Business with FinCEN (No.
`31000195443783) and as a money transmitter, a seller of payment instruments and in other
`non-securities capacities in many different states. It is not, however, registered as a money
`transmitter or in any other capacity with the Texas Department of Banking and it is not
`registered as a securities dealer with the Texas State Securities Board.
`FTX US owns 75 percent or more of the outstanding equity of FTX Capital Markets
`(CRD No. 158816) (“FTX Capital”), a firm registered as a broker-dealer with the United States
`Securities and Exchange Commission, the Financial Industry Regulatory Authority Inc., and
`53 state and territorial securities regulators. FTX Capital’s registration as a dealer in Texas
`became effective on May 7, 2012, and the registration continues to remain in force and effect.
`
`17
`
`

`

`Case 1:22-cv-23753-XXXX Document 1 Entered on FLSD Docket 11/15/2022 Page 18 of 41
`
`Edwin Garrison v. Samuel Bankman-Fried, et al.
`Class Action Complaint and Demand for Jury Trial
`FTX US maintains a website at https://ftx.us that contains a webpage for smartphone
`applications for FTX (formerly Blockfolio)21 (the “FTX Trading App”) and FTX US Pro. Users
`appear able to click a link in this webpage to download the FTX Trading App even when they
`reside in the United States.
`On October 14, 2022, I downloaded and installed the FTX Trading App on my
`smartphone. I created an account with FTX Trading through the FTX Trading App and linked
`the FTX account to an existing personal bank account. During the process, I provided my full
`first and last name and entered my residential address in Austin, Texas. I also accessed
`hyperlinks in the FTX Trading App that redirected to the Privacy Policy and Terms of Service.
`Although I was from the United States and was using the application tied to FTX Trading, the
`Privacy Policy and Terms of Service were from FTX US - not FTX Trading.
`I thereafter used the FTX Trading App to initiate the transfer of $50.00 from my bank
`account to the FTX account and then transferred .1 ETH from a 3.0 wallet to the FTX account.
`The transfer of funds from my bank account to the FTX account will take up to six days to
`complete but the transfer of ETH was processed within a few minutes.
`The FTX Trading App showed that I was eligible to earn a yield on my deposits. It
`also explained the “Earn program is provided by FTX.US” – not FTX Trading.3 It also
`repr