Mark Cuban accused of defrauding investors in crypto ‘Ponzi scheme’

Mark Cuban, Dallas billionaire and Shark Tank investor, is known for his sharp business acumen and success as an entrepreneur. But he now faces a larger class-action lawsuit accusing Cuban of misleading investors over his promotion of now-bankrupt cryptocurrency trading platform and brokerage Voyager Digital.

Voyager Digital, which filed for bankruptcy in July, was led by Stephen Ehrlich, CEO and co-founder. While still in business, the company primarily catered to small merchants, using generous introductory rewards to draw people in. The end result was that the company got over three million investors who invested 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 very popular in recent years and is used in many different ways, but it has proven to be a volatile investment. There have also been many scams with the digital currency, which has gotten 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, 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 promotional code, matched the amount with a $100 deposit and made a trade.

To top it off, Mark Cuban added his personal stamp of approval to Voyager Digital. Not only did he claim to be a customer, but he talked about the benefits of the platform, saying it was easy, cheap and fast. He even called it “the perfect fit for our Mavs fans.”

That has enraged investors, who feel Cuban and Ehrlich used their experience to trick millions into investing in the platform and buying Voyager Earn Program Accounts (“EPA”).

As such, the plaintiffs in the class action seek prosecution for complicity in fraud and complicity in breach of fiduciary duty. They also pursue civil conspiracy and unjust enrichment. In addition, the lawsuit seeks relief in the form of “an award of actual, direct and compensatory damages.”

When Voyager Digital declared bankruptcy, the filing indicated that the company was looking for partners. Additionally, a July 6 press release stated that the company had crypto assets in the region 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 has authorized Voyager Digital to return $270 million in funds 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 may not be the last to see legal action following the massive dive into crypto assets. The case may even set a precedent for those to come.