Shaquille O’Neal Under Lawsuit for Alleged Unregistered Securities in Astrals Tokens & NFTs

Former NBA legend, Shaquille O’Neal is facing a lawsuit concerning alleged violations of securities laws due to his sale of unregistered Astrals tokens. This development is according to a proposed class-action filed in a federal court in Florida. The suit contends that O’Neal knowingly endorsed these tokens despite understanding the possible regulatory complications related to the sales of unregistered cryptocurrency securities.

The legal dispute has placed O’Neal among several celebrity defendants named in a lawsuit against the founder, Sam Bankman-Fried, and other celebrities who publicly supported the platform. Central to the case is the assertion that Astrals Non-Fungible Tokens (NFTs) fulfill all the requirements to be classified as a security. This determination will be scrutinized using the Howey Test, a standard method of determining whether a transaction constitutes an investment contract.

In 2022, O’Neal, alongside his music manager Brian Bayati as CEO and his son, Myles O’Neal, heading investor relations, launched the Astrals Project. The initiative aimed to encourage investment in a virtual world, facilitating social interaction between users via distinctive avatars tradable on a dedicated marketplace. Alongside this, investors could acquire NFTs at an official marketplace using Astrals tokens. O'Neal's participation in various Ethereum projects, including his own NFT series, helped him build a reputation in the crypto world prior to founding the Astrals Project.

However, the suit has highlighted O’Neal’s extensive promotion of the Astrals Project. Through a series of NFTs named the “Shaq Signature Pass,” he boasted that only 50 of these would ever exist, obtainable solely through community participation or by bidding on Astral tokens. He regularly promoted Astrals NFTs on his social media platforms, imploring investors to “hop on the wave before it’s too late.” The complaint further asserts that O’Neal leveraged the Astrals Project to enhance his credibility by endorsing FTX.

The plaintiffs claim that Astrals tokens have experienced a “steep drop” in floor price. Lawyer for the plaintiff, Adam Moskowitz, in response to criticism over the lack of regulatory clarity in the crypto industry, argues that “securities regulation is not meant to be precise but is instead intentionally drafted to be broad and all-encompassing.” He adds, “Clarity is not just uncommon; it is deliberately avoided.”

A contentious point in the ongoing case is O'Neal allegedly avoiding being served. Lawyers representing the investors assert they have attempted to serve him at his residence, workplace, and car for several months. O’Neal, however, refutes these claims. He has previously featured in ads for FTX and is attempting to distance himself from the company, stating he was “just a paid spokesperson.”

This lawsuit comes in the wake of a series of legal actions against celebrities who have endorsed cryptocurrencies. In 2019, DJ Khaled and boxer Floyd Mayweather Jr. were fined by the US Securities and Exchange Commission (SEC) for endorsing Initial Coin Offerings (ICOs) without disclosing payment. In 2021, actor Steven Seagal faced charges by the SEC for promoting a cryptocurrency without revealing he was compensated.

This surge in celebrity crypto endorsements has sparked concerns over the potential for fraud and manipulation. Regulators have advised investors to exercise caution when investing in cryptocurrencies, encouraging independent research before making investments. The SEC has issued warnings to celebrities endorsing cryptocurrencies, mandating that any compensation they receive must be disclosed.