Cristiano Ronaldo is facing a $1billion class action lawsuit in the US after promoting his non-fungible token (NFT) partnership with cryptocurrency exchange Binance on social media.
Binance has recently taken a hit on its reputation. Last week, Binance chief executive Changpeng Zhao resigned from the company after pleading guilty to money laundering violations. The US justice department also said Binance would have to pay $4.3 billion (£3.4bn) in penalties — and report suspicious activity to federal authorities.
Last November, Ronaldo launched a collection of NFTs with the company, the cheapest of which cost $77. A year later, it was worth about $1. Plaintiffs sued the 38-year-old in Florida, alleging they made losing investments behind his social media advertisements for Binance products.
The Athletic digs through the 130-page lawsuit to explain the claims against Ronaldo and to analyze what it means for the wider issue of footballers promoting controversial investments.
Cristiano Ronaldo’s representatives did not comment when contacted. Binance has also been approached for comment.
What did Ronaldo do?
Ronaldo announced the Binance tie-up in November 2022 but the lawsuit says the deal was signed months before. Binance announced its ‘CR7’ collection of NFTs in partnership with Al Nassr forward.
NFTs are virtual assets based on blockchain technology that underpin cryptocurrencies, such as Bitcoin, and can be bought and sold as investments.
These digital assets can be bought online and traded. It involves entering competitions with prizes — like the chance to meet Ronaldo.
While a year or two ago, NFTs were widely touted as the future of fan engagement in football, the hype has largely died down as token prices have plummeted in value.
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The lawsuit explains how Ronaldo repeatedly promoted not only his NFTs but also Binance in general on his social media pages, including last month.
What does the lawsuit accuse Ronaldo of?
The lawsuit says the “general purpose” of the partnership was for Ronaldo “to help Binance successfully solicit or attempt to solicit investors in Binance’s crypto-related securities from Florida and nationwide”. It also states that Binance is listed on Ronaldo’s personal website in a section called “I work with brands I believe in”.
Investors say Ronaldo is responsible for losing their money because, they say, the fact that he was promoting his collaborative NFT collection with Binance materially misled them into believing that other crypto assets held on the platform is safe and not invested in unregistered securities when, they claim, that is not the case. They said that Ronaldo knew or should have known that in promoting Binance, without disclosing how much he was being paid for doing so, he was involved in “unfair and fraudulent practices”.
They accuse Ronaldo of a “sustained and aggressive” promotion and advertising campaign that was “hugely successful” in signing up new users.
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“After news of Ronaldo’s newly created NFT collection with Binance was announced publicly, online searches for NFT-related search terms skyrocketed, including a 500 percent increase in searches using the keyword that ‘Binance’,” the lawsuit said, adding that “premium -level NFTs sold out within the first week”.
The lawsuit argues that when users sign up for Binance to access Ronaldo’s NFTs and related benefits, they are more likely to invest in Binance for other purposes. This involves buying cryptocurrency tokens that are not formally regulated by financial regulators. So they sued Ronaldo for $1billion in damages.
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The lawsuit also alleges that, given Ronaldo’s extensive financial resources to obtain advice, he “knew or should have known of potential concerns regarding Binance’s sale of unregistered crypto securities” that may have played a role in fraud.
What are unregistered securities?
The lawsuit alleges that “through his social media promotions, NFT collection, and other advertising activities, Mr Ronaldo personally participated and assisted Binance in making sales of unregistered securities”.
This concept of unregistered securities forms a major part of the lawsuit.
The US Securities and Exchange Commission (SEC) says that assets like cryptocurrencies can be considered “securities” — financial assets that can be traded — and thus celebrities who endorse them must comply with US law.
On June 8, 2023, Gary Gensler, chairman of the SEC, said that cryptocurrency tokens are “classic securities”.
This means that the tokens must usually be registered with the authorities. This is not the case for Binance’s cryptocurrency products, which the plaintiffs say were promoted to them after they learned of the platform when they saw it through Ronaldo’s Instagram account.
“The evidence now shows that Binance’s fraud only reached such heights through the offer and sale of unregistered securities, with the willing aid and assistance of some of the richest, most powerful and recognized organizations and celebrities in worldwide like the defendant, Ronaldo,” the lawsuit said, adding that social media influencers like Ronaldo played a major role in the rise of Binance by “hyping these unregistered securities”.
Ronaldo plays in Saudi Arabia for Al Nassr (Yasser Bakhsh/Getty Images)
What will happen next?
Jemma Fleetwood, a digital asset specialist lawyer at JMW Solicitors, said now that he had been served with the court proceedings, Ronaldo would have the opportunity to respond.
“Ronaldo will likely discuss with his legal advisers whether the claim has legal merit, what his defense will be and whether he should offer to settle the case,” Fleetwood said.
“Given the level of claimed damages, it is likely to be difficult for him to settle this case at an early stage and thus the matter may reach a trial where the parties are required to give evidence to public in the case.”
Are there other similar cases?
Basketball legend Shaquille O’Neal has been accused in two separate cases of promoting unregistered securities as part of a sponsorship deal with cryptocurrency exchange FTX.
Fleetwood says it’s not just O’Neal and Ronaldo.
“Similar cases have been brought against boxing legend Floyd Mayweather, along with music producer DJ Khaled, for failing to disclose payments received from promoting initial coin offerings (ICOs),” it said. he. “Mayweather and Khaled previously settled those claims for $750,000.
“Ronaldo may also try to settle the claims against him to avoid a public trial, the increased legal costs and significant time spent preparing court filings.”
Former NBA star Shaquille O’Neal (Frazer Harrison/Getty Images)
What is the bigger picture?
Over the past few years, cryptocurrency companies have partnered with many football players and clubs to promote their products. Insiders say this is because the sport is seen as the cheapest way to advertise globally to the young male demographic, who tend to be particularly interested in football and cryptocurrency.
Despite a lot of hype when cryptocurrency prices started to soar during the pandemic, making some people rich very quickly, things are looking less rosy now. Token prices plummeted and top clubs and players saw the tokens they promoted plummet in value.
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It is worth noting that some footballers still promote cryptocurrency products on their social media profiles. But two of the players who are still doing it are Ronaldo and Lionel Messi, who have promoted multiple cryptocurrency companies — including in recent months. They probably don’t need the money, given their success on the pitch, but do it anyway.
The two men are the two most followed people on Instagram in the world.
Although lesser players no longer promote cryptocurrency, as the industry’s reputation has taken a hit, two of the most popular players in the world still do. There are no suggestions that Messi’s promotions are illegal, but anyone promoting crypto assets will be watching this case with interest to see what the US courts say about the extent to which they can be held liable for anything improperly done by a company they have links to, even if the product they’re promoting is fine.
(Top photo: Yasser Bakhsh/Getty Images)
