Cristiano Ronaldo is facing a $1 billion class action lawsuit in the United States after promoting his non-fungible token (NFT) collaboration with cryptocurrency exchange Binance on social media.
Binance recently suffered a major blow to its reputation. Last week, Binance CEO Changpeng Zhao resigned from the company after pleading guilty to money laundering violations. The US justice department also said Binance would be required to pay $4.3 billion (£3.4 billion) in fines and report suspicious activity to federal authorities.
Last November, Ronaldo launched a collection of NFTs with the company, the cheapest of which was priced at $77. A year later, this costs about $1. Plaintiffs sued the 38-year-old in Florida, claiming he made losing investments based on advertising Binance products on social media.
Atletico have delved into the 130-page lawsuit to explain the allegations against Ronaldo and to analyze what it means for the broader issue of footballers promoting controversial investments.
Representatives for Cristiano Ronaldo did not comment when contacted. Binance was also contacted for comment.
What did Ronaldo do?
Ronaldo announced a tie-up with Binance in November 2022, but the lawsuit claims the deal was signed a few months earlier. Binance announced its “CR7” NFT collection in collaboration with Al Nassr attacker.
NFTs are virtual assets based on the blockchain technology that underpins cryptocurrencies, such as Bitcoin, and can be bought and sold as investments.
These digital assets could be purchased online and traded. This was linked to participation in prize competitions, such as the opportunity to meet Ronaldo.
While a year or two ago NFTs were widely touted as the future of fan engagement in soccer, the hype has largely died down as token prices have plummeted in value.
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The lawsuit explains how Ronaldo has 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 states that the “overall objective” of the partnership was for Ronaldo to “help Binance successfully solicit or attempt to solicit investors in Binance’s cryptocurrency-related securities from Florida and nationwide.” You also note that Binance is listed on Ronaldo’s personal website in a section called “I work with brands I believe in.”
Investors allege that Ronaldo is responsible for the loss of their money because, they say, the fact that he was promoting his collaborative NFT collection with Binance materially led them to believe that other crypto assets held on the platform were safe and were not invested in non-securities. registered when, they claim, this was not the case. They say Ronaldo knew or should have known this and that in promoting Binance, without disclosing how much he was paid to do so, he engaged in “unfair and deceptive practices.”
They accuse Ronaldo of a “continuous and aggressive” promotion and advertising campaign that has been “incredibly successful” in recruiting new users.
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“After news of Ronaldo’s new NFT collection created with Binance was publicly announced, online searches for NFT-related search terms emerged, including a 500% increase in searches using the keyword ‘Binance,’” says lawsuit, adding that “premium top-tier NFTs sold out within the first week.”
The lawsuit stated that eleven users signed up for Binance to access Ronaldo’s NFTs and associated benefits, and were more likely to invest in Binance for other purposes. This included the purchase of cryptocurrency tokens that were not formally regulated by financial regulators. They then sued Ronaldo for $1 billion in damages.
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The indictment further alleges that given Ronaldo’s vast financial resources with which to obtain advice, he “knew or should have been aware of potential concerns about the sale of unregistered crypto securities by Binance” which may have played a role in fraud.
What are non-nominal titles?
The lawsuit claims that “through his social media promotions, NFT collection, and other advertising activities, Mr. Ronaldo personally participated in and assisted Binance in the sale of unregistered securities.”
This concept of unregistered securities is an important part of the case.
The US Securities and Exchange Commission (SEC) says assets such as cryptocurrencies can be considered “securities” – financial assets that can be traded – and therefore celebrities endorsing them must follow US law.
On June 8, 2023, SEC Chairman Gary Gensler said that cryptocurrency tokens are “classic securities.”
This means that tokens generally need to be registered with the authorities. This was not the case with Binance’s cryptocurrency products, which the plaintiffs claim were promoted after they were made aware of the platform when they discovered it via Ronaldo’s Instagram account.
“The evidence now reveals that the Binance fraud was only able to reach such levels through the offering and selling of unregistered securities, with the help and willing assistance of some of the richest, most powerful and most recognized organizations and celebrities around the world, just like the defendant, Ronaldo,” the lawsuit reads, adding that social media influencers like Ronaldo played an important role in the rise of Binance by “promoting these unregistered securities.”
What will happen next?
Jemma Fleetwood, digital assets lawyer at JMW Solicitors, says now that he has been served with court proceedings, Ronaldo will have the opportunity to respond.
“Ronaldo will likely discuss with his legal advisors whether the claim has legal merit, what his defense will be and whether he should make an offer to settle the case,” Fleetwood says.
“Given the scale of the damages sought, it will likely be difficult for him to resolve the case at an early stage and so the matter could eventually reach a trial where the parties would be required to give evidence publicly on the case.”
Are there other similar cases?
Basketball legend Shaquille O’Neal has been accused in two separate lawsuits of promoting unregistered securities as part of an endorsement deal with cryptocurrency exchange FTX.
Fleetwood says O’Neal and Ronaldo aren’t the only ones.
“There have been similar cases filed against boxing legend Floyd Mayweather, along with music producer DJ Khaled, for failing to disclose payments received from promoting initial coin offerings (ICOs),” he says. “Mayweather and Khaled had previously settled such claims for approximately $750,000.
“Ronaldo could similarly seek to settle the lawsuits brought against him to avoid a public trial, increased legal fees and significant time spent preparing court documents.”
What’s the bigger picture?
Over the past two years, cryptocurrency companies have collaborated with many football players and clubs to promote their products. Insiders say this is because sports is seen as the cheapest way to advertise worldwide to young males, who tend to be particularly interested in football and cryptocurrency.
Despite the hype when cryptocurrency prices started to rise during the pandemic, making some people rich very quickly, things are looking a lot less rosy now. Token prices have plummeted and top clubs and players have seen the value of the tokens they promote decline.
Explained: How the cryptocurrency crash affected every Premier League club
It is surprising that few footballers still promote cryptocurrency products on their social media profiles. But two of the players who continue to do so are Ronaldo and Lionel Messi, who has promoted several cryptocurrency companies, including in recent months. They’re unlikely to need the money, given their success on the pitch, but they do it anyway.
The two men are the two most followed people on Instagram in the world.
While smaller players no longer promote cryptocurrency as the industry’s reputation has taken a hit, the two most famous players in the world continue to do so. There has been no suggestion that Messi’s promotions are illegal, but anyone promoting cryptocurrencies will be watching this case with interest to see what the US courts say about the extent to which they can be liable for anything improper done by a company they have ties to , even if the product they are promoting has no problems.
(Top photo: Yasser Bakhsh/Getty Images)