Feb 15 (Reuters) - Former FTX clients of Sam Bankman-Fried have sued three private equity and venture capital firms, accusing them in a proposed class action lawsuit of fraudulently promoting the cryptocurrency exchange before it went bankrupt.
According to a complaint filed Tuesday night in federal court in San Francisco, Sequoia Capital, Thoma Bravo and Paradigm were "incentivized" in 2021 and 2022 to promote FTX for the more than $550 million they invested before its sudden collapse.
The clients said the defendants gave FTX an "air of legitimacy" by ensuring they had vetted their operations, and a Sequoia executive once said "we did our homework," finding them "safe" for cryptocurrency investors.
โBillions of dollars in client assets became victims of the greed of Bankman-Fried and its accomplices, such as the defendants,โ the complaint states.
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The lawsuit seeks unspecified damages for alleged violations of California consumer protection laws, as well as fraudulent inducement, intentional misrepresentation, and civil conspiracy.
Previous litigation accused celebrities such as football quarterback Tom Brady, basketball guard Stephen Curry and actor Larry David of improperly inducing people to invest in FTX.
Sequoia, Thoma Bravo and Paradigm did not immediately respond to requests for comment Wednesday.
Bankman-Fried is not a defendant.
The 30-year-old son of Stanford Law School professors has pleaded not guilty to fraud and other charges for allegedly stealing billions of dollars from FTX clients. He lives with his parents as part of his $250 million bail package.
A hearing in Manhattan federal court on whether to adjust bail is scheduled for Thursday, after Bankman-Fried allegedly attempted to inappropriately communicate with potential government witnesses.
The case is Rabbitte v Sequoia Capital Operations LLC et al, US District Court, Northern District of California, No. 23-00655.
Reporting by Jonathan Stempel in New York
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