A new lawsuit accuses billionaire Shark Tank investor Mark Cuban of partnering with now bankrupt crypto platform Voyager Digital to dupe investors in “a massive Ponzi scheme.”
A class-action lawsuit filed on Wednesday on behalf of millions of investors alleges that 3.5 million Americans lost over $5 billion dollars in cryptocurrency assets through Voyager. It says the scheme depended on vocal and monetary support from Cuban.
Stephen Ehrlich, CEO of Voyager, and the Dallas Mavericks, the NBA team owned by Cuban, are also listed as defendants. The lawsuit says that Cuban, Ehrlich and the Mavericks should pay the victims back.
“Cuban and Ehrlich, as will be explained, went to great lengths to use their experience as investors to dupe millions of Americans into investing — in many cases, their life savings,” the lawsuit claimed.
Cuban did not immediately return a request for comment on the lawsuit.
The suit filed by The Moskowitz Law Firm in Miami at the US District Court in Southern Florida said that Cuban and Ehlrich “personally reached out to investors, individually and through the Dallas Mavericks, to induce them to invest in the deceptive Voyager platform.”
Managing partner of the law firm Adam Moskowitz said his firm has heard from hundreds of Voyager investors who said they signed up on the app after seeing Cuban talk about it. Some of the investors lost hundreds of thousands of dollars, he said.
“Hundreds have called and said, ‘The only reason I got into Voyager and crypto is Cuban. He’s the only person I’d respect enough to put my life savings in these accounts,” Moskowitz said.
The lawsuit said Voyager is suspect because it claims to be commission-free to gain an edge over competitors like Coinbase. But, in reality, Voyager sets its pricing high enough that it can take “exorbitant hidden commissions on every cryptocurrency trade.”
Moskowitz said his firm hired crypto experts who immediately knew that Voyager’s claims were suspect.
“Cuban was going around doing a roadshow with Ehrlich saying that he did an investigation and that this was a safe investment,” Moskowitz said. “And we just couldn’t figure out how could he say that? I mean, in a very quick minute, our experts are saying it’s a scam. So what’s going on here? Something was very strange.”
While promoting Voyager, Cuban said that he himself had decided it was safe and used it to invest, the lawsuit says. But Moskowitz said that he hasn’t seen any documentation in the bankruptcy case that shows Cuban lost money.
“It could be that he did lose money,” Moskowitz said. “But we’ve asked for proof and haven’t seen anything. It’s very troubling.”
Oftentimes, when celebrities endorse cryptocurrency products, they are getting a personal deal on the side that is different from everyday investors, Moskowitz said. Cuban hasn’t disclosed the amount of compensation he receives for promoting Voyager, the lawsuit said.
The Mavericks first announced a five-year exclusive partnership with Voyager in October 2021. Fans were given a limited deal where if they deposited $100 and traded at least $10 by the end of the month, they got a $100 reward. The influx of new users was so great that Voyager added a waitlist.
The partnership announcement from the Mavericks said that Voyager was a way “to earn high returns while also getting skin in the game.” It also said that it was “an attractive investment for novice investors who might only have $100 to start.”
Voyager temporarily suspended all trading and withdrawals on its platform on July 1 shortly before filing for bankruptcy in New York on July 5, listing both assets and liabilities between $1 billion and $10 billion.
Voyager Digital stock is down more than 98% over the past year to less than $1. The company’s token, VGX, is down more than 90% for the same time period.
The timing of the partnership was less than ideal. It launched last October, just weeks before digital currencies peaked in November before crashing. Since early November, the global market cap of cryptocurrencies has fallen from $2.9 trillion to $1.2 trillion.
The lawsuit against Cuban follows a $258 million lawsuit filed against Tesla CEO Elon Musk in June in which a Dogecoin investor accused him of running a pyramid scheme. The plaintiff, Keith Johnson, filed the lawsuit in Manhattan and accused Musk of using his contacts, including Cuban, to boost the price of Dogecoin.
Earlier this year, Cuban said on The Problem With Jon Stewart podcast that outside of his ‘Shark Tank’ investments, 80% of his investments are in or around cryptocurrencies. In a recent episode of the Full Send podcast, Cuban didn’t waver on his confidence in the industry.
“I’m still bullish on crypto,” he said on the podcast. “Obviously, it’s way down right now. I took a hit. Everyone took a hit on crypto.”