Cristiano Ronaldo is facing a $1billion class action lawsuit in the U.S. after promoting his non-fungible token (NFT) collaboration with cryptocurrency exchange Binance on social media.
Binance has recently taken a hit to its reputation. Last week, Binance chief executive Changpeng Zhao resigned from the company after pleading guilty to money laundering violations. The United States’ justice department also said Binance would be required to pay $4.3billion (£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 was priced at $77. One year later, this costs about $1. The plaintiffs are suing the 38-year-old in Florida, claiming they made loss-making investments on the back of his social media advertisements for Binance products.
The Athletic dug through the 130-page lawsuit to explain the claims against Ronaldo and to analyse 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 a tie-in with Binance in November 2022 but the lawsuit says the deal was signed some months before. Binance announced its ‘CR7’ collection of NFTs in partnership with the Al Nassr forward.
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 bought online and traded. Associated with this was entry to competitions with prizes — such as the opportunity 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 off as token prices have plunged in value.
Remember NFTs? This is how football’s projects dived in value
The lawsuit explains how Ronaldo has repeatedly promoted not just his NFTs but also Binance generally on his social media pages, including last month.
What does the lawsuit accuse Ronaldo of?
The lawsuit claims the “overarching objective” 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 notes that Binance is listed on Ronaldo’s personal website in a section called “I work with brands I believe in”.
The investors claim Ronaldo is responsible for them losing their money because, they say, the fact he was promoting his collaborative NFT collection with Binance materially misled them into believing that other crypto assets held on the platform were safe and were not being invested in unregistered securities when, they claim, that was not the case. They say Ronaldo knew or ought to have known this and that in promoting Binance, without disclosing how much he was being paid for doing so, he engaged in “unfair and deceptive practices”.
They accuse Ronaldo of a “sustained and aggressive” promotion and advertising campaign that was “incredibly successful” in signing up new users.
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“After the news of Ronaldo’s newly created NFT collection with Binance was publicly announced, online searches for NFT-related search terms surged, including a 500 per cent increase in searches using the keyword ‘Binance’,” the lawsuit says, adding that “premium-level NFTs sold out within the first week”.
The lawsuit argues that once users had signed up for Binance to access Ronaldo’s NFTs and associated benefits, they were more likely to invest in Binance for other purposes. This included buying cryptocurrency tokens that were not formally regulated by financial regulators. They are therefore suing Ronaldo for $1billion in damages.
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The lawsuit also says that, given Ronaldo’s vast financial resources with which to obtain advice, “he knew or should have known of potential concerns about Binance selling unregistered crypto securities” that may have played a role in fraud.
What are unregistered securities?
The lawsuit says “through his social media promotions, NFT collection, and other advertising activities, Mr Ronaldo personally participated in and aided Binance in making the sale of unregistered securities”.
This concept of unregistered securities forms a major part of the lawsuit.
The U.S. Securities and Exchange Commission (SEC) says assets like cryptocurrencies can be considered “securities” — financial assets that can be traded — and thus celebrities endorsing them must follow U.S. law.
On June 8, 2023, Gary Gensler, chair of the SEC, said cryptocurrency tokens are “classic securities”.
This means tokens must generally be registered with the authorities. This was not the case for Binance’s cryptocurrency products, which the plaintiffs allege were promoted to them after they were made aware of the platform when they came across it via Ronaldo’s Instagram account.
“Evidence now reveals that Binance’s fraud was only able to reach such heights through the offer and sale of unregistered securities, with the willing help and assistance of some of the wealthiest, most powerful and recognized organizations and celebrities across the globe just like the defendant, Ronaldo,” the lawsuit says, adding that social media influencers such as Ronaldo played a major role in Binance’s rise by “hyping these unregistered securities”.
What will happen next?
Jemma Fleetwood, a digital asset specialist lawyer at JMW Solicitors, says that now he has been served with court proceedings, Ronaldo will have the opportunity to respond.
“Ronaldo will likely be discussing with his legal advisers whether the claim has legal merit, what his defence will be and whether he should make an offer to settle the case,” Fleetwood says.
“Given the level of damages claimed, it will likely be difficult for him to settle this case at an early stage and so the matter could eventually reach a trial where the parties would be required to publicly give evidence on the case.”
Are there any other similar cases?
Basketball legend Shaquille O’Neal was accused in two separate lawsuits of promoting unregistered securities as part of a sponsorship deal with the cryptocurrency exchange FTX.
Fleetwood says O’Neal and Ronaldo are not the only ones.
“There have been similar cases brought against boxing legend Floyd Mayweather, along with music producer DJ Khaled, for failing to disclose payments received from promoting initial coin offerings (ICOs),” she says. “Mayweather and Khaled previously settled those claims for around $750,000.
“Ronaldo may similarly attempt to settle the claims brought against him to avoid a public trial, the escalation of legal costs and significant time spent on preparing court filings.”
What is the bigger picture?
Over the past couple of years, cryptocurrency companies have worked 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 around the world to the young male demographic, who tend to be particularly interested in football and cryptocurrency.
Despite lots of hype when cryptocurrency prices started booming in the pandemic, making some people rich very quickly, things look a lot less rosy now. Token prices have plummeted and top clubs and players have seen tokens they promoted plunge in value.
Explained: How the crypto crash has impacted each Premier League club
It is striking that few footballers are still promoting cryptocurrency products on their social media profiles. But two of the players still doing so are Ronaldo and Lionel Messi, who has promoted multiple cryptocurrency companies — including in recent months. They are unlikely to need the money, given their on-pitch success, but do it anyway.
The two men are the two most followed people on Instagram in the world.
While lesser players no longer promote cryptocurrency, as the industry’s reputation has taken a serious hit, the two most famous players in the world are still doing so. There have been no suggestions Messi’s promotions are illegal, but anyone promoting crypto assets will be watching this case with interest to see what the U.S. courts say about to what extent they can be responsible for anything improper done by a company with which they have links, even if the product they are promoting is problem-free.
(Top photo: Yasser Bakhsh/Getty Images)