In a recent development, a former official from the Securities and Exchange Commission (SEC), John Reed Stark, has criticized the NBA’s decision to approve a partnership between cryptocurrency exchange Voyager Digital and the Dallas Mavericks. Stark argues that the NBA should be held accountable for any misconduct related to cryptocurrencies by NBA teams. This allegation has led to a proposed class-action lawsuit against the NBA and the law firm McCarter & English. Let’s delve deeper into the implications of this controversy.
Stark expressed his concerns on social media, drawing a parallel between the NBA’s response to illegal or unethical activities and its handling of crypto partnerships. He suggests that if a team were to associate with organizations engaged in illicit practices, the NBA would swiftly intervene. Stark believes that the same standards should be applied to crypto partnerships, asserting that the Mavericks, by partnering with Voyager, share culpability for the harm inflicted upon investors. He compares the hypothetical scenario of the Washington Wizards partnering with heroin manufacturers or blood diamond mining companies, emphasizing that the NBA would intervene in such cases.
The partnership between Voyager and the Dallas Mavericks has resulted in a class-action lawsuit filed by disgruntled investors. Allegedly, false claims were made by the crypto exchange regarding investor protection. The owner of the Mavericks, Mark Cuban, is set to be deposed in the coming month. This lawsuit has raised questions about the NBA’s potential responsibility for the alleged fraud associated with Voyager.
Voyager faced financial turmoil, culminating in a Chapter 11 bankruptcy filing in July 2022, following a decline in the crypto market. This bankruptcy filing came approximately eight months after the partnership with the Mavericks was announced. Furthermore, the United States Commodity Futures Trading Commission and the Federal Trade Commission (FTC) filed concurrent lawsuits against former Voyager CEO Stephen Ehrlich, accusing him of making fraudulent statements. While Voyager reached a settlement with the FTC, agreeing to provide $1.65 billion in monetary relief, Ehrlich did not agree to a settlement, leading to an ongoing case in federal court. The NBA is also grappling with a proposed class-action lawsuit related to its marketing partnerships with Voyager.
The extent of the NBA’s potential culpability in the alleged Voyager fraud remains unclear. However, Stark contends that the NBA should be held answerable for any misconduct by NBA teams, including deceptive crypto partnerships. This controversy has ignited discussions about sports organizations’ role in scrutinizing and regulating their partnerships to ensure ethical practices.
The case involving Voyager is currently unfolding in the U.S. Bankruptcy Court for the Southern District of New York. A restructuring plan proposed in May 2023 aims to compensate Voyager customers with either cryptocurrency or cash, allowing them to recover 35.7% of their claims initially. The outcome of this legal battle will have significant implications for the crypto industry and the NBA’s handling of similar partnerships in the future.
The NBA’s approval of the Voyager-Mavericks partnership has brought forth allegations of crypto fraud and raised questions about the NBA’s responsibility in such cases. The ongoing legal proceedings and class-action lawsuit against the NBA underscore the need for organizations to exercise caution while entering into crypto partnerships. As the outcome of this controversy unfolds, it serves as a reminder of the importance of accountability and due diligence in the rapidly evolving world of cryptocurrencies.
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