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 justice department also said Binance would have to pay $4.3bn (£3.4bn) in fines and report suspicious activity to federal authorities.
Last November, Ronaldo launched a collection of NFTs with the company, the cheapest of which was priced at $77. A year later, this costs about $1. Plaintiffs are suing the 38-year-old in Florida, alleging they made loss-making investments thanks to his social media ads for Binance products.
The Athletic He examined the 130-page lawsuit to explain the claims against Ronaldo and analyze what they mean for the broader issue of footballers promoting controversial investments.
Cristiano Ronaldo’s representatives had no comment when contacted. Binance has also been contacted for comment.
What did Ronaldo do?
Ronaldo announced a tie-up with Binance in November 2022, but the lawsuit says the deal was signed a few months earlier. Binance announced its ‘CR7’ NFT collection in partnership with forward Al Nassr.
NFTs are virtual assets based on the blockchain technology that underpins cryptocurrencies, such as Bitcoin, and can be bought and sold as investments.
These digital assets can be purchased and traded online. This was associated with entering competitions with prizes, such as the opportunity to meet Ronaldo.
While NFTs were widely touted as the future of fan engagement in football a year or two ago, the enthusiasm has largely died down as token prices have fallen in value.
Remember NFTs? This is how football projects fell in value
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 lawsuit claims that the “overall objective” 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.” He also notes that Binance is listed on Ronaldo’s personal website in a section called “I work with brands I believe in.”
Investors claim that Ronaldo is responsible for them losing their money because, they say, the fact that he was promoting his collaborative NFT collection with Binance materially misled them into believing that other crypto assets held on the platform were safe and not invested in securities. not registered. when, they claim, it was not like that. They say Ronaldo knew or should have known this and that by promoting Binance, without disclosing how much he was paid to do so, he engaged in “unfair and deceptive practices.”
They accuse Ronaldo of a “sustained and aggressive” promotion and advertising campaign that was “incredibly successful” in attracting new users.
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“After news of Ronaldo’s new NFT collection with Binance was publicly announced, online searches for NFT-related search terms spiked, including a 500 percent increase in searches using the keyword ‘Binance'” , the lawsuit says, adding that “premium-tier NFTs sold out in the first week.”
The lawsuit argues that once users signed up for Binance to access Ronaldo NFTs and associated benefits, they were more likely to invest in Binance for other purposes. This included the purchase of cryptocurrency tokens that were not formally regulated by financial regulators. Therefore, they are suing Ronaldo for $1 billion in damages.
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The lawsuit also says that, given Ronaldo’s vast financial resources for advice, “he knew or should have known of potential concerns about Binance’s sale of unregistered crypto securities” that may have played a role in the fraud.
What are unregistered securities?
The lawsuit says that “through his social media promotions, NFT collection, and other advertising activities, Mr. Ronaldo personally participated in and assisted Binance in conducting the sale of unregistered securities.”
This concept of unregistered securities constitutes an important part of the lawsuit.
The US Securities and Exchange Commission (SEC) says assets like cryptocurrencies can be considered “securities” (financial assets that can be traded) and therefore celebrities who endorse them must comply with US law.
On June 8, 2023, SEC Chairman Gary Gensler said that cryptocurrency tokens are “classic securities.”
This means that tokens generally need to be registered with authorities. This was not the case with Binance’s cryptocurrency products, which the plaintiffs claim were promoted to them after they learned about the platform when they found it through Ronaldo’s Instagram account.
“The evidence now reveals that the Binance fraud was only able to reach such heights through the offer and sale of unregistered securities, with the help and voluntary assistance of some of the richest, most powerful and renowned organizations and celebrities from around the world. , like the accused. Ronaldo,” the lawsuit says, adding that social media influencers like Ronaldo played a major role in the rise of Binance by “advertising these unregistered securities.”
What will happen next?
Jemma Fleetwood, specialist digital asset lawyer at JMW Solicitors, says that now that he has been served with the court proceedings, Ronaldo will have the opportunity to respond.
“Ronaldo will probably discuss with his legal advisors whether the claim has legal merit, what his defense will be and whether he should make an offer to settle the case,” Fleetwood says.
“Given the level of damages claimed, you will likely find it difficult to settle this case at an early stage, so the matter could eventually go to trial in which the parties would be required to testify publicly about the case”.
Are there other similar cases?
Basketball legend Shaquille O’Neal was accused in two separate lawsuits of promoting unregistered securities as part of an endorsement deal with cryptocurrency exchange FTX.
Fleetwood says O’Neal and Ronaldo aren’t the only ones.
“Similar cases have been filed against boxing legend Floyd Mayweather, along with music producer DJ Khaled, for failing to disclose payments received for promoting initial coin offerings (ICOs),” it says. “Mayweather and Khaled previously settled those claims for around $750,000.
“Ronaldo may also attempt to resolve the claims brought against him to avoid a public trial, escalating legal costs and significant time spent preparing court files.”
What is the big picture?
In recent years, cryptocurrency companies have worked with many football players and clubs to promote their products. Insiders say this is because the sport is considered the cheapest way to advertise worldwide among the young male demographic, which tends to be particularly interested in football and cryptocurrencies.
Despite the big splash when cryptocurrency prices started skyrocketing during the pandemic, making some people rich very quickly, things look a lot less rosy now. Token prices have plummeted and top clubs and players have seen the value of the tokens they promoted fall.
Explained: How the crypto crash has affected every Premier League club
It is striking that few footballers continue to promote cryptocurrency products on their social media profiles. But two of the players still doing it are Ronaldo and Lionel Messi, who has promoted multiple cryptocurrency companies, including in recent months. It’s unlikely they need the money, given their success on the field, but they do it anyway.
The two men are the two most followed people on Instagram in the world.
While minor players are no longer promoting cryptocurrencies, as the industry’s reputation has taken a serious hit, the two most famous 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 the US courts say about the extent to which they can be held liable for any improper activity carried out by a company with which have links. even if the product they promote has no problems.
(Top photo: Yasser Bakhsh/Getty Images)