Yahoo Finance's Alexis Keenan discusses the lawsuit billionaire Mark Cuban is facing over allegations that he misrepresented his partnership with the now-bankrupt crypto firm Voyager.
BRIAN CHEUNG: Well, let's shift gears over to the Dallas Mavericks owner, Mark Cuban, who's being accused of misleading investors in a Ponzi scheme involving Voyager Digital. Yahoo! Finance's Alexis Keenan here with the latest. Alexis, give us a little bit more of an update on exactly what the allegations are here.
ALEXIS KEENAN: Hi, Brian. This comes from a group of Voyager customers. They filed a federal lawsuit in district court in Miami against Mark Cuban, who's a business partner and investor in Voyager, as well as his NBA team, the Dallas Mavericks, as well as the CEO and co-founder of Voyager, Stephen Ehrlich.
Now, these plaintiffs from nine states, they want to be certified as a class. They say that the defendants violated dozens of state laws. Those include illegally selling unregistered securities, fraud, breach of fiduciary duties, conspiracy, among others. But the suit specifically goes after Cuban and Ehrlich for touting Voyager. Of course, they filed for bankruptcy back on July 5th, as you mentioned.
The plaintiffs say here that the two misrepresented the risk of investing on the exchange. They say that the two were capitalizing with their statements on naive and novice traders. They likened it, as you said, to a Ponzi scheme, saying that these misrepresentations were included, that the platform was actually a cheaper way to trade than on competing platforms.
They said that its existence relied on Cuban's support and the support of a partnership with the Cuban-owned Mavericks. They also said that they were misleading Mavericks fans and that it was holding itself out as really an education platform, this partnership, so that they could educate newcomers to the crypto space.
So I want to just give you an idea of the type of statements that these plaintiffs were saying were illegal. So this is a clip of Mark Cuban back in November with Ehrlich, announcing this Mavericks partnership with Voyager. Take a listen.
MARK CUBAN: First and foremost, fans who download the app, create an account using the promotional code MAVS100, deposit $100, and make a trade will get $100 in crypto. I'm guessing that's Voyager?
STEPHEN EHRLICH: No, we're going to give you BTC on this one.
MARK CUBAN: BTC? Oh, there you go. OK. Offer is only available for the first 48 hours, and starts right now.
ALEXIS KEENAN: Well, Cuban has also called the now-bankrupt Voyager as close to risk-free as you're going to get in the crypto universe. But of course, like other platforms, Voyager has come under a lot of regulatory scrutiny from both the federal and state regulators for these interest-bearing crypto accounts, saying that they really should be designated as securities.
So a lot more to come here, but certainly this lawsuit comes after these plaintiffs already tried to go after Voyager itself before the bankruptcy. Brian.
RACHELLE AKUFFO: Alexis, just with a follow up here. Now, this is obviously the second time, as you mentioned, that these plaintiffs are going after Voyager, so what makes this case different?
ALEXIS KEENAN: Yeah, so the difference here is the prior lawsuit went directly after Voyager. And what happens once Voyager files for bankruptcy is that all those cases-- all the litigation against it, it gets an automatic stay. So those lawsuits are going nowhere.
With this filing going after Cuban personally, going after the Mavericks, and going after Ehrlich, that may keep it out of the bankruptcy estate. Now, there'll be arguments about that. Whether or not that will happen is on the other side of a bunch of court motions and hearings.
But look, this is very different animal as far as a lawsuit goes. This is going directly after Cuban. And certainly, it could remain separate from the bankruptcy estate and go directly after his assets.
RACHELLE AKUFFO: I mean, there's certainly a case there in really deciding on what you put your name to, especially when it comes to something as volatile as crypto. Thank you very much, our very own Alexis Keenan.