Professional footballer Cristiano Ronaldo has been sued for his partnership with leading cryptocurrency exchange Binance, as per a 27 November filing to US district court in Florida.
The legal action was taken by a group of plaintiffs who claim to have suffered losses worth over $1 billion due to Ronaldo’s involvement with the exchange. The class-action lawsuit, filed by Michael Sizemore, Mikey Vongdara and Gordon Lewis, seeks damages and funds to cover legal fees.
Recently, Binance has been in the hotseat legally, having to pay a hefty settlement to the US government for violating Anti-Money Laundering laws and operating as an unregistered money-transmitting business. Its founder Changpeng “CZ” Zhao also stepped down from the top CEO position, pleading guilty to the charge of violating the Bank Secrecy Act.
The lawsuit against Ronaldo alleged that he “promoted, assisted in, and/or actively participated in the offer and sale of unregistered securities in coordination with Binance”. The exchange’s multi-year partnership with the footballer was etched in 2022 to promote a series of his own non-fungible tokens (NFTs). Here, there are at least three of the soccer star’s collections connected to Binance.
According to the plaintiffs, the users who signed up for Ronaldo’s NFTs were more likely to use Binance for other purposes. His promotions, in turn, “solicited or assisted Binance in soliciting investments in unregistered securities” where millions of his followers, fans, and supporters were encouraged to invest with the Binance platform.
The footballer’s influence and reach, spanning more than 850 million followers across social media, was key in garnering much popularity for Binance, said the complaint. This helped in the promotion of its NFT sales which were “incredibly successful”, with a 500% increase in searches for Binance the week following the initial sale.
‘He should have known’
A key argument in the lawsuit alleged that Ronaldo knew or at least should have known “about Binance selling unregistered crypto securities” considering his “investment experience and vast resources to obtain outside advisers”.
The complaint also cited US Securities and Exchange Commission’s (SEC) guidance, released earlier this year, which warned celebrities of the need to disclose payments received for promoting cryptocurrencies. This came in after the SEC’s $1.4 million settlement with former NBA player Paul Pierce for allegedly promoting a token project on social media.
According to the regulator, Pierce had attempted to sell EthereumMax (EMAX) tokens through his social media channels without revealing to the public that he had received payment for the promotion. He therefore made “false and misleading statements” regarding the project, about which SEC Chair, Gary Gensler, said:
“This case is yet another reminder to celebrities: The law requires you to disclose to the public from whom and how much you are getting paid to promote investment in securities, and you can’t lie to investors when you tout a security. When celebrities endorse investment opportunities, including crypto asset securities, investors should be careful to research if the investments are right for them, and they should know why celebrities are making those endorsements.”
The fall-out of crypto sponsorships
Major crypto firms have heavily invested in sponsorships with leading personalities and brands in the sports industry over the last few years. However, the number of deals have dropped recently in the light of the prolonged crypto winter.
The industry’s credibility also took a hit following the collapse of crypto exchange FTX and the whole Sam Bankman-Fried saga. The exchange had bagged a sponsorship agreement with one of F1’s leading teams, Mercedes, along with its famous driver Lewis Hamilton.
This partnership even went to the extent where FTX’s logos were featured on cars, uniforms, and merchandise in the Netflix’s Drive to Survive. However, this was soon followed by a stipulation agreement filed by Mercedes to dissolve its partnership with the collapsed exchange.
The Ferrari team also ended its blockchain pact with Swiss crypto firm Velas in January 2023. While details regarding the finances involved or litigation proceedings were not revealed, the team announced the news in a statement which said: “Unfortunately, the agreement with Velas has been terminated early by us.”