Mark Cuban, Dallas billionaire and Shark Tank investor, is known for his sharp business sense and success as an entrepreneur. But he is now facing a major class-action lawsuit that accuses Cuban of misleading investors due to his promotion of the now bankrupt cryptocurrency trading platform and brokerage Voyager Digital.
Voyager Digital, which went bankrupt in July, was led by Stephen Ehrlich, its CEO and co-founder. While it was still in business, the company primarily catered to small-time traders, using generous introductory rewards to pull people in. The end result was the company gaining over three million investors that put in around five billion dollars in funds.
The lawsuit against Mark Cuban points out that he and the Dallas Mavericks were instrumental in bringing people to the platform. Additionally, it describes Voyager Digital as “unregulated and unsustainable fraud.” The lawsuit also compares it to Ponzi schemes, which target the young and inexperienced.
Cryptocurrency has been wildly popular in recent years and is used in many different ways, but it has proven itself to be a volatile investment. There have also been many scams involving the digital currency, which have been made worse since reliable educational resources are scarce.
But none of that stopped people from investing, especially with the Cuban-owned Dallas Mavericks offering fans a deal and naming Voyager Digital the “official crypto partner of the Dallas Mavericks.”
The Mavericks signed a partnership deal with Voyager Digital in October 2021 and used it to push fans of the team to the platform. The deal allowed users to receive $100 in free cryptocurrency if they created an account using a promo code, matched the amount with a $100 deposit, and made a trade.
To top it off, Mark Cuban added his personal seal of approval to Voyager Digital. Not only did he claim to be a customer, but he spoke about the merits of the platform, saying it was easy, cheap, and fast. He even called it the “perfect fit for our Mavs fans.”
It has left investors outraged, feeling as if Cuban and Ehrlich used their experience to dupe millions into investing in the platform and purchasing the Voyager Earn Program Accounts (“EPAs”).
As such, plaintiffs in the class-action lawsuit are seeking charges for aiding and abetting fraud and aiding and abetting breach of fiduciary duty. They are also pursuing civil conspiracy and unjust enrichment charges. In addition, the lawsuit is demanding relief in the form of “awarding actual, direct and compensatory damages.”
When Voyager Digital declared bankruptcy, the filing indicated that the company was looking to bring on partners. Moreover, a July 6th press release stated that the company was holding crypto assets in the realm of $1.3 billion and more than $350 million in cash belonging to the platform’s users frozen in an FBO account.
Since the press release, the judge presiding over the bankruptcy proceedings cleared Voyager Digital to return $270 million in funds held in the frozen account.
Despite some of the funds being released by the court, the pressure on Mark Cuban does not appear to be going anywhere, with those involved in the class-action desperate for financial relief. And he might not be the last to see legal action after the massive dive in crypto assets. The case might even set a precedent for those to come.