The National Basketball Association (NBA) and lawyers representing collapsed crypto lender Voyager Digital have been hit with a lawsuit over the promotion and defense of the firm that investors say led to $4.2 billion in losses.

The lawsuit, filed on Tuesday, alleges the NBA was “grossly negligent” when Mark Cuban, the former owner of the Dallas Mavericks, struck a marketing deal with Voyager.

It claims that the NBA accepted billions in promotional compensation as Covid left the association with “empty arenas and the loss of billions in television revenues.” It added that the NBA leveraged its “global reputation and trust in the NBA brand,” to promote the selling of unregistered and illegal securities to the public.

McCarter & English LLP, the law firm that represented Voyager, was alleged to have “produced fraudulent legal opinions” while maintaining Voyager was operating “entirely above board.”

Read more: DoJ appeals against Voyager asset deal with Binance US

Cuban was sued by Voyager investors shortly after the lender went bankrupt in 2022. He was accused of shilling Voyager Digital’s unregistered securities and contributing to the loss of billions in a Ponzi-style scheme.

McCarter & English reportedly said it will “vigorously defend the firm, which provided clear and competent advice to our clients.”

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Several bankrupt cryptocurrency firms, including Alameda Research, Blockfolio, Celsius, and Voyager, previously received Payroll Protection Program (PPP) loans through the pandemic-era program.

The Payroll Protection Program was a pandemic-era business stimulus program that offered loans to businesses that maintained employment of its employees through the beginning of the pandemic; these loans could then be forgiven. The program was plagued by fraud, with the Small Business Administration inspector general identifying $78.1 billion in potentially fraudulent loans.

Sam Bankman-Fried’s failed trading firm, Alameda Research, received a $370,518 loan from Signature Bank and successfully paid back the loan. Bankman-Fried was subsequently convicted of multiple felony counts related to fraud conducted at Alameda Research.

Read more: Scammers pose as bankruptcy firm to drain Celsius users’ wallets

Blockfolio, a firm that would end up as part of the Bankman-Fried wreckage, also received a PPP loan of $458,211 from Wells Fargo. The loan was forgiven. 

Cryptocurrency lenders also received PPP loans. Celsius Networks received a $281,502 loan from Signature Bank that was also waved away. Alex Mashinsky, the former chief of Celsius, has been charged with multiple counts of fraud related to Celsius. Voyager Digital received a $619,400 PPP loan from Dime Community Bank, but unlike Celsius, its loan was repaid. 

PPP loans were an entirely legal program, and there is no evidence (beyond criminal prosecutions directed at executives at several of these firms) to suggest that there was anything untoward in the process of receiving these loans.

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Sam Bankman-Fried’s bankrupt crypto lending arm Alameda Research has filed a lawsuit against bankrupt crypto brokerage Voyager Digital, in an attempt to reclaim approximately $446 million in loan payments.

The lawsuit described Voyager Digital as a ‘feeder fund’ that ‘fueled’ the misconduct of Alameda Research. A feeder fund is a structure where investors invest in that fund, and the investments are then fed into the ‘master fund’ which executes the investments — a key target for clawbacks in the Bernie Madoff case.

“The collapse of Alameda and its affiliates amid allegations that Alameda
was secretly borrowing billions of FTX-exchange assets is widely known,” the lawsuit stated. “Largely lost in the (justified) attention paid to the alleged misconduct of Alameda and its now-indicted former leadership has been the role played by Voyager and other cryptocurrency “lenders” who funded Alameda and fueled that alleged misconduct, either knowingly or recklessly.”

The lawsuit further alleged that after Voyager commenced bankruptcy proceedings, it demanded repayment of loans that had been extended to Alameda Research. However, the lending arm claims that these loans were all repaid in full.

Read more: From Alameda chief to bankrupting FTX, meet Caroline Ellison

This case has been further complicated due to the fact that in October, Voyager returned collateral supposedly associated with the repaid loans to Alameda Research. Alameda claims it’s been unable to determine whether or not the collateral was attached to its loans.

Before its own bankruptcy, FTX and Alameda Research entered a bid to purchase Voyager Digital. This would have allowed Voyager customers to become FTX customers and withdraw their funds. During this period, FTX allegedly loaned customer funds to Alameda Research, leading to its own collapse.

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Texas is investigating FTX, FTX.US, and Sam Bankman-Fried for selling unregistered securities. The investigation was revealed in a new filing as part of the ongoing Voyager bankruptcy hearing during which FTX has placed a bid for the lending platform.

Texas State Securities Board Director of Enforcement Division Joseph Rotunda revealed that he was able to easily download FTX’s application and begin earning yield on his ether deposit while inputting his accurate KYC information.

Joseph also emphasized that FTX US isn’t registered as a money transmitter or a securities dealer in Texas.

This ongoing investigation is likely going to complicate Bankman-Fried’s ongoing efforts to acquire all failing cryptocurrency lending platforms, especially with the filing specifically requesting that “FTX US should not be permitted to purchase the assets of the debtor unless or until the Securities Commissioner has an opportunity to determine whether FTX US is complying with the law.”

The Securities and Exchange Commission (SEC) has also been actively working against crypto yield programs, dissuading Coinbase from offering its Earn product. It’s also supposedly been probing other cryptocurrency lenders, including Gemini and Celsius.

Read more: SBF loves the CFTC so much he’s hired its former commissioner

A previous Freedom of Information Act request to the SEC from Protos requesting documents related to investigations of FTX US for selling unregistered securities was denied, citing an exemption protecting from disclosure records compiled for law enforcement.

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Troubled trading platform Voyager says the amount of crypto users can expect to get back depends largely on how much it manages to recover from collapsed hedge fund Three Arrows Capital (3AC).

Voyager previously lent 3AC $650 million in bitcoin and USDC but the Toronto-based company was left holding the bag when the Singapore-based fund declared bankruptcy in June and refused to play ball with liquidators.

As a result, despite pushing 3AC for the funds, Voyager has itself been forced to file for chapter 11 bankruptcy and is undergoing “a voluntary restructuring process.” This, it says will restore access to USD deposits following a fraud prevention process.

However, things aren’t looking so straightforward for customers with crypto deposits still on-platform.

According to a statement released on Monday, in addition to its outstanding claim against 3AC, Voyager holds around $1.3 billion in crypto assets on its platform.

The plan is to redistribute these funds with customers receiving a combination of:

• Pro-rata share of crypto
• Pro-rata share of proceeds from the 3AC recovery
• Pro-rata share of common shares in the newly reorganized Company
• Pro-rata share of existing Voyager tokens

Voyager adds that customers will be able to tailor the proportion of crypto and equity they receive, depending on certain maximum thresholds.

Read more: Three Arrows Capital liquidated by multiple lenders after ghosting

But even with this plan in place customers still have no idea exactly how much they’ll be able to claim back.

“At this stage, we are proposing that customers will receive their crypto as described above,” reads Voyager’s statement.

“However,” it adds, “the exact numbers will depend on what happens in the restructuring process and the recovery of 3AC assets,” (our emphasis).

If Voyager wants its money it has to find 3AC founders first

Voyager has been chasing 3AC for the outstanding millions for some time. According to Forbes, the firm wanted $25 million in USDC by June 24 with the rest of the outstanding debt to follow by June 27. However, this hasn’t happened yet.

And the prospects of getting back the funds don’t look great so far. Three Arrows’ issue with Voyager is just one of a raft of liquidations and unpaid debts that have dogged the company since it went under.

To make things worse, according to recent reports, founders Su Zhu and Kyle Davies are nowhere to be found and when officials tried to track them down at the firm’s Singapore office, all they found were locked doors and piles of unopened mail.

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