By Jonathan Stempel
Feb 15 (Reuters) - Former customers of Sam
Bankman-Fried's FTX have sued three venture capital and private
equity firms, accusing them in a proposed class action of
fraudulently promoting the cryptocurrency exchange before it
went bankrupt.
According to a complaint filed late Tuesday in San Francisco
federal court, Sequoia Capital, Thoma Bravo and Paradigm were
"incentivized" in 2021 and 2022 to tout FTX by the more than
$550 million they invested prior to its sudden collapse.
The customers said the defendants lent FTX an "air of
legitimacy" by vouching that they had examined its
operations--with a Sequoia executive once saying "we did our
homework"--and found them "safe and secure" for cryptocurrency
investors.
"Billions of dollars' worth of customer assets became a
casualty of the greed of Bankman-Fried and of his
co-conspirators, such as the defendants," the complaint said.
The lawsuit seeks unspecified damages for alleged violations
of California consumer protection laws, as well as fraudulent
inducement, intentional misrepresentation and civil conspiracy.
Earlier litigation accused celebrities like football
quarterback Tom Brady, basketball guard Stephen Curry and actor
Larry David of improperly inducing people to invest with FTX.
Sequoia, Thoma Bravo and Paradigm did not immediately
respond on Wednesday to requests for comment.
Bankman-Fried is not a defendant.
The 30-year-old son of Stanford Law School professors has
pleaded not guilty to fraud and other charges for allegedly
looting billions of dollars from FTX customers. He is living
with his parents as part of his $250 million bail package.
A Manhattan federal court hearing on whether to tighten bail
is scheduled for Thursday, after Bankman-Fried allegedly tried
to communicate improperly with potential government witnesses.
The case is Rabbitte v Sequoia Capital Operations LLC et al,
U.S. District Court, Northern District of California, No.
23-00655.
(Reporting by Jonathan Stempel in New York)
Messaging: jon.stempel.thomsonreuters.com@reuters.net))
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