Column: Mark Cuban rips plaintiffs lawyers in Voyager celebrity endorsement case

May 17 (Reuters) – (The opinions expressed here are those of the author, a columnist for Reuters.)

Suing a celebrity is a double-edged sword. Your suspicions get extra attention – but so does your conduct.

That’s the context for new assertions by Mark Cuban – the billionaire Shark Tank star and owner of the NBA’s Dallas Mavericks – about the way that plaintiffs’ lawyers have pursued their claims that Cuban breached securities laws by inducing investors to open interest-bearing accounts at now -bankrupt crypto lending firm Voyager Digital Ltd (VYGVQ.PK).

Cuban’s lawyers argued in two motions filed this week in Miami federal court that plaintiffs’ counsel allowed some of their clients to put forth false statements and that the lawyers signed off on a proposed amended pleading that asserts “manufactured” allegations have been proven to be false.

Cuban’s lawyers at Brown Rudnick and Fowler White Burnett asked US District Judge Roy Altman of Miami to deny a request by lawyers at The Moskowitz Law Firm and Boies Schiller Flexner to file a second amended class action complaint, arguing that plaintiffs and their counsel have engaged in bad-faith litigation.

“A lawyer should not be permitted to fabricate accusations, which is per se bad faith conduct, as has occurred here, to secure leave to replead,” wrote Cuban’s lawyers.

The motion to deny leave does not specify which plaintiffs’ lawyers Cuban is accusing of bad faith tactics. The service list accompanying the motion identifies Moskowitz as counsel and Boies Schiller as co-counsel for the plaintiffs.

The improper tactics, according to Cuban’s lawyers, include gamesmanship in plaintiffs’ serial “reformulations” of their pleadings, purportedly to avoid a reckoning for their case’s evidentiary flaws. Cuban also contends that plaintiffs have included “flagrant” misrepresentations in the new proposed complaint about Cuban’s relationship with Voyager and its CEO, Stephen Ehrlich, even though, according to Cuban, Boies Schiller and Moskowitz know the evidentiary record believes their portrayal.

In a separate motion for sanctions for allegedly prolonging frivolous litigation, Cuban argued that the Moskowitz firm and name partner Adam Moskowitz knew or should have known that neither of their Florida class representatives had a viable claim. (The sanctions motion seeks fees and costs only from Moskowitz and his firm, not Boies Schiller.) The Moskowitz firm, according to Cuban, therefore should be on the hook for Cuban’s defense costs in debunking the Florida plaintiffs’ allegations.

Cuban asserts that one of the Florida plaintiffs does not have standing because she has never even opened a Voyager account in her own name and, moreover, no longer lives in Florida. The other purported Florida class representative specifically asserted that he had opened a Voyager account because of Cuban’s endorsement – ​​but according to the sanctions motion, he actually opened his account several months before Cuban held a press conference announcing the Dallas Mavericks’ sponsorship deal with Voyager.

Cuban lawyers from Brown Rudnick specifically warned Moskowitz about these alleged problems with the Florida plaintiffs even before taking deposits in connection with their jurisdictional challenge, according to emails attached as an exhibit to the sanction motion. The email chain included Brown Rudnick’s detailed threat of a sanctions claim against Moskowitz. His response: “Long email, but you can bill by the hour.”

A spokesperson for Boies Schiller name partner David Boies said he was unavailable for comment.

Moskowitz said in an email statement that the new accusations prove Cuban is afraid of public exposure for his allegedly illegal touting of Voyager securities. “Mr. Cuban continues to fight us every step of the way, demanding we keep secret all of his incriminating internal e-mails and deposition testimonies,” Moskowitz said. “The reality is that Mr. Cuban cannot provide any defense as to whether these Voyager accounts are ‘unregistered securities’ and/or whether he ‘promoted’ these illegal products, because he told his team he did a great job promoting Voyager.”

Moskowitz said the “specific personal attacks” in Cuban’s new filings are provably false. He also said Cuban’s attempt to evade Florida jurisdiction by discrediting the lawsuit’s Florida plaintiffs “will not work because we have many hundreds of victims that have agreed all to stand up to him.”

The theory of the case, based on the amended complaint filed by Boies Schiller and Moskowitz last October, is that Voyager’s “earn program” accounts, which offered crypto and stablecoin bonuses to account holders who maintained particular balances in their accounts, were unregistered securities. According to plaintiffs, when Cuban wholeheartedly endorsed Voyager during a Dallas Mavericks press conference in October 2021 – disclosing that he had personally invested in the company and pledging $100 in bitcoin to Mavs fans who downloaded the Voyager app – Cuban and his team illegally hyped those unregistered securities, in violation of several states’ securities and consumer protection laws.

The proposed second amended complaint that is the subject of one of Cuban’s motions this week was filed under seal and is not available on the docket. Both sides have said that the new version does not include one of the allegedly problematic Florida plaintiffs as a proposed class representative but does assert claims on behalf of the other. Plaintiffs voluntarily dismissed claims by a third proposed Florida plaintiff earlier this year, citing health issues. Cuban had highlighted that plaintiff’s prior criminal convictions for financial fraud.

Cuban previously moved last November to dismiss the first amended Voyager complaint for jurisdictional problems and failure to state a claim. He also moved in January to transfer the case to federal court in Texas, arguing that the plaintiffs’ choice of venue does not deserve deference because, among other issues, the purported Florida plaintiffs have asserted “patently defective” claims.

Altman, the Florida judge, has not ruled on either of those motions.

Boies Schiller and Moskowitz have used the “brand ambassador” theory they developed in their Voyager case against Cuban to sue several other celebrities for allegedly violating state securities laws when they endorsed the now-bankrupt crypto exchange FTX.

The plaintiffs firms have asked the US Judicial Panel on Multidistrict Litigation to transfer all private federal lawsuits by FTX investors to Miami federal court, where, as I’ve previously reported, they plan to seek court appointments to lead the entire FTX investor litigation.

The MDL panel will hear arguments on the Moskowitz and Boies Schiller bid for control of the FTX litigation on May 25.

Read more:

Boies, co-counsel move to take control of all private FTX cases

Crypto lender Voyager Digital files for bankruptcy

Reporting by Alison Frankel; editing by Leigh Jones

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence and freedom from bias.