Mark Cuban’s Crypto Garbage & Boies v. Brady
“If you made this into a movie, people wouldn’t believe it,” David Boies told me last week, marveling at the collapse of FTX and Sam Bankman-Fried before stepping onto his 184-foot sailboat en route to St. Barths. “It’d be interesting even if you took three zeroes off of what happened.” Boies, the ubiquitous lawyer who has represented Elizabeth Holmes, Al Gore, Harvey Weinstein, and the victims of Jeffrey Epstein, should know. He has, after all, executive produced 15 movies. (He was also engaged by the current WaPo C.E.O. Fred Ryan in a messy bygone D.C. media exit that ended up going nowhere, as my partner Dylan Byers recently reported.) The S.B.F. saga, he told me, is one of the most fascinating cases of his career.
Boies, now 81, was in need of a brief vacation. His caseload includes hounding Google on privacy and antitrust fronts, representing an Italian luxury heiress in a deliciously juicy fight that’s causing a mess in the financial community (more on that later), and, perhaps most surprising, leading a set of extraordinary lawsuits targeting the cryptocurrency industry.
It’s no simple task to recover money from a company or executive in the full throes of bankruptcy. Wall Street traders are increasingly optimistic that some money can be salvaged from FTX after C.E.O. John J. Ray III, the attorney overseeing the bankruptcy, floated the possibility of restarting the crypto exchange. But these salvage efforts can take years—just ask Irving Picard, who continues to hunt for Bernie Madoff’s stolen money. And litigants like Boies typically have to wait at the back of the line, behind investors, creditors, and the feds, in a sprawling criminal case such as this.
Of course, Boies isn’t one for waiting. Instead, he’s been pursuing an aggressive legal strategy that takes a wildly different route towards the money. In a nutshell, he’s suing Tom Brady, Larry David, Gisele Bundchen, Stephen Curry and other celebrities for using their fame to entice consumers into opening FTX accounts. As I’ve previously written, I’m skeptical that even the best lawyer can convince a jury that these stars should have known what Bankman-Fried was up to. But Boies is undeterred. As he told me on the phone, he recently sent Brady a subpoena to sit for a deposition—presumably the first of many.
Boies acknowledged that he’s “walking a fine line to avoid bankruptcy and criminal stays,” referring to the stuff happening to FTX and S.B.F. in other courtrooms that could put his own case on ice. But he insists that crypto fraud makes a very good vehicle for a group lawsuit. “This is what class actions were meant to address,” he said. “Life savings were lost. Individually, it wouldn’t support a lawsuit, but together…”
I hear Boies, but I suspect he’s headed for choppy waters. That’s partly because I’ve also been paying close attention to his parallel case against Mark Cuban, which has already hit a major snag.
David Boies v. Mark Cuban
Among the first crypto industry dominoes to fall was Voyager, a brokerage company that attracted millions of customers by teasing absurd double-digit returns. Of course, it was all too good to be true: FTX attempted to swoop in to buy Voyager for pennies on the dollar before filing for bankruptcy, itself. Now some $5 billion of customer deposits is endangered, and Boies is on the attack, likening what happened to a Ponzi scheme.
One of his targets is Cuban, who announced a sponsorship deal in October 2021 that made Voyager the official crypto partner of the Dallas Mavericks. A complaint, filed in Florida federal court, claims that by helping hawk unregistered securities, Cuban broke various state laws and aided and abetted a fraud. Boies is scheduled to depose Cuban on Thursday.
Interestingly, the lawsuit originally targeted Cuban and Voyager C.E.O. Stephen Ehrlich, but Ehrlich was dropped from the case once it became clear that pursuing him would result in a delay thanks to Voyager’s automatic bankruptcy stay, which paused litigation. Nevertheless, as part of the lingering case against Cuban, Boies is still attempting to depose Ehrlich, which caused the latter to file a new case a few days ago in Connecticut in a bid to quash a subpoena. (Don’t be surprised if Boies pursues a similar strategy to depose S.B.F. in the Tom Brady case.)
As for Cuban, his lawyers have attacked the Boies-led case as a “strike suit, plain and simple,” which is legalese for, This is meritless garbage designed to force a nuisance-saving settlement. And they’re challenging the jurisdictional basis for dragging a billionaire who famously lives in Texas into Florida court.
Here’s where the case gets interesting and, perhaps, strategically revealing. On one hand, Cuban insists he doesn’t have much contact with Florida—that is, except for owning two pricey vacation condos in Miami and attending Mavericks away games. But he might have overstated things. After declaring under oath that he hadn’t done anything involving Voyager in the state, Boies’ team quickly dug up the fact that Cuban was the keynote speaker at a crypto conference last year in Miami, along with Ehrlich. Now they’re suggesting that Cuban committed perjury, and a magistrate judge has agreed to force Cuban to testify at a deposition about his ties to Florida, as well as his basis for saying at the press conference announcing the sponsorship that, “I’ve been a [Voyager] customer for several months now. I like to use it.”
Meanwhile, who are the actual plaintiffs in this suit? Originally, Boies named a dozen Voyager account holders, but only three of them were Florida residents, and it turned out that only one opened an account after Cuban touted Voyager during the sponsorship announcement. What’s more, that guy is a three-time felon with a history of financial fraud, according to court docs, and he’s now looking to bow out of the case after a cancer diagnosis.
Boies’ team has found a pair of replacements and want to amend the suit to include a new federal claim that might alleviate some of the jurisdictional challenges, but that raises another obscure problem—the Private Securities Litigation Reform Act, which contains a provision that pauses discovery until a defendant’s motion to dismiss is decided. So with mere days to go until Cuban’s deposition, his lawyers at Brown Rudnick and Fowler White are attempting to squeeze Boies by having him pick between a good client and immediate discovery.
Maybe Boies will figure this stuff out before dealing with celebrities like Brady and Shaquille O’Neal in the FTX endorsement case. Clearly, he’s throwing into very tight windows, and it’s only the first quarter. The hard stuff—convincing a judge and jury that the pitchmen were knowingly engaged in a conspiracy—still awaits.
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