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Lawsuit accuses Dallas’ Mark Cuban of duping investors with crypto ‘Ponzi scheme’

The suit claims that 3.5 million Americans lost over $5 billion dollars in cryptocurrency assets.

A new lawsuit accuses Dallas Mavericks owner and billionaire Shark Tank investor Mark Cuban of partnering with now bankrupt crypto platform Voyager Digital to dupe investors in “a massive Ponzi scheme.”

The class-action suit, filed in federal court in southern Florida on behalf of millions of investors, alleges that 3.5 million Americans lost over $5 billion in cryptocurrency assets through Voyager.

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 users are waiting to see if they will get their money back when the company comes out of bankruptcy, either on its own or with a new owner.

Adam Moskowitz, managing partner of Miami-based Moskowitz Law Firm, said it’s not likely the bankruptcy process will get users their money back.

“I’ve never seen a bankruptcy where people come out of it better than they were before,” Moskowitz said.

Cuban’s NBA team and Voyager CEO Stephen Ehrlich are also listed as defendants. The lawsuit said Cuban, Ehrlich and the Mavs should pay the victims back. The Mavs announced a five-year partnership with Voyager in 2021 that made it the team’s first cryptocurrency brokerage and international partner. 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.

“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 respond to The Dallas Morning News’ request for comment on the lawsuit.

The suit said Cuban and Ehrlich “personally reached out to investors, individually and through the Dallas Mavericks, to induce them to invest in the deceptive Voyager platform.”

Moskowitz said his firm has heard from hundreds of Voyager investors who signed up after seeing Cuban endorse it. Some 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.

Voyager is suspect because it claims to be commission-free to gain an edge over competitors like Coinbase, which do have commissions, the suit said. It noted that Voyager sets its pricing high enough so it can take “exorbitant hidden commissions on every cryptocurrency trade.”

“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 he personally invested in it, the suit said. But Moskowitz said 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 documentation and haven’t seen anything. It’s very troubling.”

Cuban hasn’t disclosed whether he’s paid to promote Voyager, the suit said.

The company and its executives also made false and misleading deposit insurance claims to increase investor confidence in the product, the suit said. However, the Federal Reserve and the Federal Deposit Insurance Corp. sent a joint letter in July telling Voyager to stop making those claims, saying they “likely misled” customers.

Voyager also ran into trouble from loaning money to a hedge fund to trade cryptocurrencies on its platform. When the price of cryptocurrencies crashed, the hedge fund couldn’t pay Voyager back. At the end of June, crypto hedge fund Three Arrows Capital defaulted on a loan from Voyager that was worth more than $670 million. Shortly after, Voyager filed for bankruptcy.

“It’s like a Ponzi scheme,” Moskowitz said. “When someone says, ‘I want my money back, they tell you, ‘Well, it was used to pay Peter, and now we have no money to pay you.’”

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 Mavs-Voyager partnership was less than ideal. It launched 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 suit against Tesla CEO Elon Musk in June in which a Dogecoin investor accused him of running a pyramid scheme. Keith Johnson’s lawsuit in Manhattan 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.”

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