John Reed Stark, the former internet enforcement director at the SEC, has taken the side of cryptocurrency investors in a lawsuit against the National Basketball Association (NBA), criticizing the NBA's approval of a partnership between the defunct cryptocurrency exchange Voyager Digital and the Dallas Mavericks. This partnership led to a class-action lawsuit from investors who felt aggrieved. Voyager had announced its collaboration with the NBA team in October 2021, allegedly based on false claims regarding investor protection.
Stark expressed his disapproval in a post dated February 8, highlighting the NBA's role in what he perceives as exploiting fans and players through cryptocurrency FOMO (fear of missing out) and diamond hands mentality. He drew an analogy, suggesting that if a basketball team partnered with a company involved in illicit activities like heroin manufacturing or blood diamond mining, the NBA would likely intervene. Stark argued that the same level of scrutiny should apply to cryptocurrency partnerships.
While acknowledging that the NBA's direct responsibility for the Voyager fraud remains unclear, Stark asserted that the NBA should be held accountable for any misconduct related to partnerships involving NBA teams. Voyager's troubles escalated amidst the cryptocurrency market downturn, culminating in its Chapter 11 bankruptcy filing in July 2022, just eight months after the partnership announcement with the Mavericks.
Further complicating matters, in October 2023, both the U.S. Commodity Futures Trading Commission and the Federal Trade Commission (FTC) filed lawsuits against former Voyager CEO Stephen Ehrlich for fraudulent representations. Voyager settled with the FTC in November 2023, agreeing to provide $1.65 billion in monetary relief. Stark suggested that beyond the civil class-action lawsuit initiated on February 6, the NBA should face potential criminal charges for its alleged role in misleading investors.
As of the publication time, the Voyager case remains pending in the U.S. Bankruptcy Court for the Southern District of New York. A restructuring plan proposed as of May 2023 indicates that Voyager customers may recoup 35.7% of their claims in cryptocurrency or cash. Stark, who served as an SEC enforcement attorney for 18 years and led its Office of Internet Enforcement, currently serves as the president of John Reed Stark Consulting.
