Why Cristiano Ronaldo is being sued in a $1 billion lawsuit by people who bought his NFTs

Cristiano Ronaldo is facing a $1 billion class action lawsuit in the US after promoting his non-fungible token (NFT) partnership with cryptocurrency exchange Binance on social media.

Binance has recently had its reputation tarnished. Last week, Binance CEO Changpeng Zhao resigned from the company after pleading guilty to money laundering violations. The US Department of Justice 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 cost $77. A year later, this costs about $1. Prosecutors are suing the 38-year-old in Florida, claiming they made loss-making investments thanks to his social media advertisements for Binance products.

The Athletics has gone through the 130-page lawsuit to explain the claims against Ronaldo and analyze what this means for the wider issue of footballers promoting controversial investments.

Cristiano Ronaldo’s representatives made no comment when contacted. Binance has also been contacted for comment.

---

What did Ronaldo do?

Ronaldo announced a partnership with Binance in November 2022, but according to the lawsuit, the deal was signed several months earlier. Binance has announced its ‘CR7’ collection of NFTs in partnership 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 can be purchased and traded online. Related to this was participation in competitions with prizes, such as the opportunity to meet Ronaldo.

While NFTs were widely touted as the future of fan engagement in football a year or two ago, the hype has largely died down as the token prizes have fallen in value.

The lawsuit explains how Ronaldo has repeatedly promoted not only his NFTs, but Binance in general, on his social media pages, including last month.

What does the lawsuit accuse Ronaldo of?

The lawsuit alleges that the “overarching purpose” of the partnership for Ronaldo was “to help Binance successfully solicit or attempt to solicit investors in Binance’s crypto-related securities from Florida and across the country.” 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 that Ronaldo is responsible for the loss of their money because, they say, the fact that he promoted his joint NFT collection with Binance materially misled them into believing that other crypto assets on the platform were safe and not were invested in unregistered securities. while according to them that 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, he was guilty of “unfair and deceptive practices.”

They accuse Ronaldo of a “sustained and aggressive” promotional and advertising campaign that was “incredibly successful” in signing up new users.

“After news of Ronaldo’s newly created NFT collection with Binance was publicly announced, online searches for NFT-related search terms increased dramatically, including a 500 percent increase in searches using the keyword ‘Binance,'” the lawsuit said, adding adding that “premium level NFTs sold out within the first week.”

The lawsuit states that once users signed up for Binance to access Ronaldo’s NFTs and their associated benefits, they were more likely to invest in Binance for other purposes. This included purchasing cryptocurrency tokens that were not formally regulated by financial regulators. That’s why they’re suing Ronaldo for $1 billion in damages.

The lawsuit also says that given Ronaldo’s vast financial resources with which to seek advice, “he was or should have been aware of potential concerns about Binance selling unregistered crypto securities” that may have played a role in fraud .

What are unregistered securities?

The lawsuit states that “through his social media promotions, NFT fundraising, 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 lawsuit.

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 who endorse 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 for Binance’s cryptocurrency products, which prosecutors allege were promoted to them after they became aware of the platform when they came across it through Ronaldo’s Instagram account.

“Evidence now shows that Binance’s fraud could only reach such heights by offering and selling unregistered securities, with the willing help and assistance of some of the wealthiest, most powerful and most recognized organizations and celebrities around the world, just like the defendant. Ronaldo,” the lawsuit said, adding that social media influencers like Ronaldo played a major role in Binance’s rise by “hyping these unregistered securities.”

What will happen next?

Jemma Fleetwood, a lawyer specializing in digital assets at JMW Solicitors, says that now that Ronaldo has been served with legal proceedings, he will be given 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 make an offer to settle the case,” Fleetwood said.

“Given the amount of damages claimed, it will likely be difficult for him to settle this case at an early stage and so the case could ultimately go to trial where the parties would be required to give public testimony about 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 cryptocurrency exchange FTX.

Fleetwood says O’Neal and Ronaldo aren’t alone.

“Similar cases have been filed against boxing legend Floyd Mayweather, along with music producer DJ Khaled, for failing to disclose the payments they received from promoting Initial Coin Offerings (ICOs),” she said. “Mayweather and Khaled previously settled those claims for approximately $750,000.

“Ronaldo may similarly seek to settle the claims brought against him to avoid a public trial, the escalation of legal costs and the significant time spent preparing court files.”

What’s the bigger picture?

In recent years, cryptocurrency companies have partnered with many footballers 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 target group, who are particularly interested in football and cryptocurrency.

Despite the big hype when cryptocurrency prices started to skyrocket 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 tokens they promote fall in value.

It is striking that few footballers promote cryptocurrency products on their social media profiles. But two of the players still doing this are Ronaldo and Lionel Messi, who have promoted multiple cryptocurrency companies – including in recent months. It’s unlikely they need the money given their success on the field, but they do it anyway.

The two men are the two most followed people on Instagram in the world.

Although smaller players are no longer promoting cryptocurrency as the sector’s reputation has taken a serious hit, the two most famous players in the world still do so. There have been 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 may be responsible for anything improper done by a company that they have ties. even if the product they are promoting is problem-free.

(Top photo: Yasser Bakhsh/Getty Images)