Dallas Mavericks Owner Mark Cuban Sued For Allegedly Promoting Voyager Digital Crypto ‘Ponzi Scheme’

The cryptocurrency sports laundering that led major crypto brokers and marketplaces to use sponsorship and advertising deals as a way to normalize and onboard members of the public is now dragging one of the sports and business world’s most famous names into federal court.

A group of investors in now-bankrupt crypto brokerage Voyager Digital have filed a federal class-action lawsuit against Voyager Digital CEO Stephen Ehrlech, billionaire Hai tank star Mark Cuban and Cuban’s NBA franchise, the Dallas Mavericks. The complaint alleges that the defendants’ marketing of Voyager Digital ultimately caused more than three million investors to lose $5 billion in holdings when Voyager went public in July.

Voyager Digital filed for Chapter 11 bankruptcy in July just days after it froze withdrawals, effectively preventing users from withdrawing their funds as it succumbed to a declining economic climate that sunk many big names in the crypto world. But Voyager’s decline also came as a result of poor investment decisions by the company itself. Filings show the company lent roughly $650 million to back up fun Three Arrows Capital, which invested heavily in the cryptocurrency Luna before it crashed dramatically earlier this year for 99% of its value.

One reason it became so attractive to crypto investors in the first place was the high returns it promised to those who kept their crypto in Voyager’s system so it could lend it out. Voyager promised as high as 10% returns on crypto holdings, prompting the complaint to describe Voyager’s operation as a “ponzi scheme” several times.

Cuban’s involvement began in October 2021, when Voyager Digital and the Dallas Mavericks entered into a five-year partnership. In a now-infamous press conference announcing the deal, Cuban called investing with Voyager Digital “as close to risk-free as you’re going to get in the crypto universe” while sitting next to Ehrlech. They also announced a 48-hour promotion where anyone who deposits $100 on the platform using the code MAVS100 will receive $100 in crypto for free.

The billionaire further promoted the security of investing with Voyager Digital by stating that he himself was a customer. The complaint alleges that Cuban did not disclose any personal compensation in exchange for promoting Voyager despite the fact that the NBA franchise he owns did.

Cuban also pitched investing with Voyager Digital as a great option for small businesses because of the high returns, and both he and Ehrlech pointed to increasing the financial education of Mavericks fans and beyond as a goal of the sponsorship.

“During the rise in crypto prices, many web3 companies, apparently including Voyager, pretended that existing laws and regulations did not apply to crypto,” attorney Shane Seppinni told TechCrunch. “Even smart people like Mark Cuban got caught up in the hype. But now that crypto prices have crashed, it’s clear to see that centuries-old legal theories like fraud, breach of fiduciary duty, and civil conspiracy are just as relevant to crypto as they are to others places.”

Voyager Digital would later form a partnership with the National Women’s Soccer League that included crypto accounts for players to be paid in crypto. Voyager Digital’s bankruptcy threw those accounts and the league’s finances into doubt. Financial records show that Voyager Digital spent upwards of $80 million on marketing, which in the crypto world focuses on celebrities and online influencers as vessels to promote the company.

There is some speculation as to whether the lawsuit will be allowed to go ahead. A judge must approve that the 12 plaintiffs currently linked to the lawsuit are representative of the three million investors the complaint claims were defrauded. That decision will be made at a later date.

Until then, Voyager Digital can deal with the additional issues surrounding its business practices and bankruptcy proceedings. The company was recently called out by the FDIC for falsely stating that investments by customers on the platform had FDIC protection. In reality, Voyager Digital’s account with Metropolitan Commercial Bank had FDIC protection, not consumer investments on the platform.

The company also drew ire for claiming it wasn’t a brokerage in its bankruptcy filing despite marketing itself as one and basically operating in the same capacity.