Mark Cuban should have expected it.
Since crypto lender Voyager Digital filed for Chapter 11 bankruptcy, criticism of the billionaire and owner of the NBA Dallas Mavericks team has rained down on social media.
These critics accuse him of promoting the platform and therefore hold him responsible for the losses they say they suffered as we wrote on July 8. These allegations are now resulting in a class action lawsuit against the successful entrepreneur.
Those angry individual investors allege Cuban and the Dallas Mavericks tricked them into investing in Voyager Digital, which went bankrupt and cost them about $5 billion in total, according to the complaint. The complaint is based on another complaint filed already in December against Voyager Digital.
The “deceptive” Voyager platform “was an unregulated and unsustainable scam, similar to other Ponzi schemes,” the plaintiffs allege. “It was specifically alleged in detail in that complaint how defendants Mark Cuban and Stephen Ehrlich were key players who personally approached investors, individually and through the Dallas Mavericks, to get them to invest in the deceptive Voyager platform.”
Ehrlich is Voyager Digital’s CEO.
5 billion dollars in losses
“Cuban and Ehrlich, as will be explained, went to great lengths to use their experience as investors to deceive millions of Americans into investing—in many cases, their life savings—in the deceptive Voyager platform and purchasing Voyager earning program accounts (“ EPAs) “), which are unregistered securities,” the plaintiffs add.
“As a result, over 3.5 million Americans have now nearly lost over $5 billion in cryptocurrency assets.”
Plaintiffs, who say they want Cuban and Ehrlich to pay them back, are primarily using the Shark Tank star’s statements in signing a partnership between the Dallas Mavericks and Voyager Digital against him.
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The Dallas Mavericks and Voyager Digital signed a five-year contract on October 28, with the mission of promoting cryptocurrencies by making coins more accessible through educational and digital programs.
As part of the partnership, Voyager promised Dallas Mavericks’ fans a $100 reward for trading crypto on Voyager for a limited time if they deposited $100 and traded just $10. The offer had been very successful, so much so that Voyager had had to set up a waiting list.
“There’s untapped potential in the future of digital currencies, and it’s an attractive investment for beginners who may only have $100 to start,” Cuban said at the time during a press conference with Ehrlich. “That’s where Voyager comes in. In other words, it’s a way to earn high returns while getting skin in the game and the Voyager platform makes the process easy and simplified for fans of all ages.”
It is not certain that the complaint will lead to a trial because a judge must already certify that the 12 people named in the complaint are representative of the 3.5 million Americans who would have been affected by the Voyager Digital setbacks.
Voyager Digital filed for bankruptcy in July, becoming one of the victims of the crisis of confidence that has wiped more than $2 trillion from the cryptocurrency market since its record highs in November. It’s hard to know if his customers will get their money back.
Voyager is a cryptocurrency trading platform. The firm also offers loans and staking services, which are a kind of reward for holding certain coins. It was the lending business that got it into trouble: Voyager appears to have loaned customers’ funds to crypto hedge fund Three Arrows Capital, also known as 3AC.
However, in June this hedge fund defaulted on a $667 million loan made to it by Voyager. Three Arrows Capital was forced by a court in the British Virgin Islands to go into liquidation. Faced with this disaster, Voyager suspended deposits, withdrawals and loyalty rewards on its platform.
A Twitter request for comment from the Dallas Mavericks has so far not been answered.
“In stocks and crypto, you’ll see companies that were sustained by cheap, easy money — but didn’t have valid business prospects — will disappear,” Cuban said in an interview with Fortune in June. [Warren] Buffett says, “When the tide goes out, you’ll see who’s swimming naked.”
The plaintiffs included this last statement in their complaint.