Why is Cristiano Ronaldo being sued in a billion dollar lawsuit by people who bought his NFTs?

Why is Cristiano Ronaldo being sued in a billion dollar lawsuit by people who bought his NFTs?

Cristiano Ronaldo is facing a $1 billion class action lawsuit in the US after promoting his non-fungible token (NFT) collaboration with cryptocurrency exchange Binance on social media.

Binance has recently taken a hit to its reputation. Last week, Binance CEO Changpeng Zhao resigned from the company after pleading guilty to money laundering violations. The US Department of Justice also said that Binance will be required to pay $4.3bn (£3.4bn) in penalties – and report any suspicious activity to federal authorities.

Last November, Ronaldo launched a batch of NFTs with the company, the cheapest of which was priced at $77. After one year, this costs about $1. Prosecutors are suing the 38-year-old in Florida, claiming they made investments at a loss on the back of his social media ads for Binance products.

The athlete The 130-page lawsuit has been mined to explain the allegations against Ronaldo and analyze what they mean for the broader issue of footballers promoting controversial investments.

Cristiano Ronaldo’s representatives did not comment when contacted. Binance has also been contacted for comment.

What did Ronaldo do?

Ronaldo announced his association with Binance in November 2022, but the lawsuit says the deal was signed a few months earlier. Binance announced its “CR7” batch of NFTs in partnership with Striker Victory.

NFTs are virtual assets based on blockchain technology that underpin cryptocurrencies, such as Bitcoin, and can be bought and sold as investments.

These digital assets can be purchased online and traded. Linked to this was entry into competitions with prizes, such as the opportunity to meet Ronaldo.

While a year or two ago, NFTs were widely touted as the future of fan engagement in football, the hype has largely waned as token prices have fallen in value.

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The lawsuit explains how Ronaldo has repeatedly promoted not only his NFTs but also Binance in general on his social media pages, including last month.

What does the lawsuit accuse Ronaldo of?

The “overarching goal” of the partnership was for Ronaldo to “assist Binance in successfully soliciting or attempting to solicit investors in Binance’s cryptocurrency-related securities from Florida and nationwide,” the lawsuit claims. It also points out that Binance is listed on Ronaldo’s personal website in a section called “I work with brands I believe in.”

Investors claim Ronaldo is to blame for the loss of their money, because they say the fact that he was promoting his NFT collaborative collection with Binance materially misled them into believing that other crypto assets on the platform were safe and were not invested in unregistered securities. While they claim that this was not the case. They say Ronaldo knew or should have known this and that by promoting Binance, without revealing how much he was being paid for doing so, he was engaging in “unfair and deceptive practices.”

They accuse Ronaldo of a “sustained and aggressive” promotional and advertising campaign that was “incredibly successful” in registering new users.

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“After news of Ronaldo’s newly created NFT collection with Binance was publicly announced, online searches for NFT-related search terms soared, including a 500 percent increase in searches using the keyword ‘Binance,’” it added. NFTs were sold at a level within the first week.

Once users registered with Binance to access Ronaldo’s NFTs and associated benefits, they were more likely to invest in Binance for other purposes, the lawsuit says. This included purchasing cryptocurrency tokens that are not officially regulated by financial regulatory bodies. Therefore, they are filing a lawsuit against Ronaldo for $1 billion in compensation.

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The suit also says that given Ronaldo’s extensive financial resources for advice, he “knew or should have known of potential concerns about Binance’s sale of unregistered crypto securities” which may have played a role in the fraud.

What are unregistered securities?

“Through his social media promotions, NFT collection, and other advertising activities, Mr. Ronaldo personally participated in and assisted Binance in selling unregistered securities,” the lawsuit says.

The concept of unregistered securities makes up a large part of the lawsuit.

The US Securities and Exchange Commission (SEC) says assets such as cryptocurrencies can be considered “securities” – financial assets that can be traded – and therefore celebrities who endorse them must follow US law.

On June 8, 2023, SEC Chairman Gary Gensler said that cryptocurrency tokens are “classic securities.”

This means that tokens generally must be registered with the authorities. This was not the case for Binance’s cryptocurrency products, which plaintiffs allege were promoted after they were made aware of the platform when they came across it via Ronaldo’s Instagram account.

“The evidence now reveals that the Binance fraud was only able to reach these heights through the offering and sale of unregistered securities, with the aid and willing assistance of some of the richest and most powerful organizations and celebrities around the world just like Defendant Ronaldo,” the lawsuit says. , adding that social media influencers like Ronaldo played a major role in Binance’s rise by “inflating these unregistered securities.”

Ronaldo plays in Saudi Arabia for Al-Nasr (Yasser Bakhsh/Getty Images)

What will happen next?

Now that he has been served with court proceedings, Ronaldo will have the opportunity to respond, says Gemma Fleetwood, a specialist digital assets lawyer at JMW Solicitors.

“Ronaldo will likely discuss with his legal advisors whether the claim has a legal basis, what his defense is and whether he should make an offer to settle the case,” Fleetwood says.

“Given the level of damages claimed, it will likely be difficult for him to settle this case at an early stage and so the matter could ultimately go to trial where the parties will be required to give public evidence in the case.”

Are there any other similar cases?

Basketball legend Shaquille O’Neal has been charged in two separate cases with promoting unregistered securities as part of a sponsorship deal with cryptocurrency exchange FTX.

Fleetwood says O’Neill and Ronaldo are not the only ones.

“There have been similar cases brought against boxing legend Floyd Mayweather, along with music producer DJ Khaled, for failure to disclose payments received from promoting initial coin offerings (ICOs),” she says. “Mayweather and Khaled previously settled these claims for approximately $750,000.

“Ronaldo may similarly attempt to settle claims against him to avoid a public trial, mounting legal costs and spending significant time preparing court filings.”

Former NBA star Shaquille O’Neal (Fraser Harrison/Getty Images)

What is the bigger picture?

Over the past two years, cryptocurrency companies have worked with several football players and clubs to promote their products. Insiders say this is because sports are seen as the cheapest way to advertise worldwide to young males, who tend to be particularly interested in football and cryptocurrencies.

Despite the huge hype when cryptocurrency prices started booming during the pandemic, leading some people to get rich very quickly, things are looking less rosy now. Token prices fell and major clubs and players saw the value of the tokens they promoted decrease.

Go deeper

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Surprisingly, a few footballers are still promoting cryptocurrency products on their social media profiles. But two players who are still doing so are Ronaldo and Lionel Messi, who have promoted several cryptocurrency companies – including in recent months. They are unlikely to need the money, given their success on the pitch, but they do it anyway.

The two men are the most followed people on Instagram in the world.

While lesser-known players no longer promote cryptocurrencies, as the industry’s reputation has taken a serious hit, the two most popular players in the world still do so. There have been no suggestions that Messi’s promotions are illegal, but anyone promoting crypto assets will be watching this case with interest to see what US courts have to say about the extent to which he can be held liable for anything inappropriate done by a company he has links to. Even if the product they are promoting is problem-free.

(Photo above: Yasser Bakhsh/Getty Images)

(tags for translation)Saudi Arabia

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