Court Dismisses Some Claims Against NBA Star Shaquille O’Neal While Allowing Others in Astrals Tokens Case
On Friday, August 16, 2024, the US District Court for the Southern District of Florida issued an order ruling on several motions in a securities fraud lawsuit involving NBA legend Shaquille O’Neal and his involvement with crypto companies Astrals LLC, Astrals Holdings LLC, and Astrals Operations LLC.
The class action suit was brought by investors Daniel Harper and Charles Divecha against the companies and O’Neal, alleging violations of federal securities laws over the sale of unregistered crypto tokens called Astrals and Galaxy. The plaintiffs claimed that O’Neal extensively promoted the Astrals Project on social media without properly disclosing the risks of investing in unregistered securities. They argued that the value of Astrals tokens was directly linked to O’Neal’s celebrity status, and that many investors were induced to invest solely due to his backing.
In its order, the court denied in part and granted in part the defendants’ motion to dismiss the amended complaint. It found that the plaintiffs had properly alleged that O’Neal was a “seller” under the definition in securities law by claiming he directly solicited investors through promotional tweets, videos, and messages on Discord. However, it agreed with the defendants that some of the token purchase claims were time-barred. The court dismissed claims based on Astrals purchases made before May 23, 2022, but allowed claims from later dates to proceed.
The order also permitted the plaintiffs’ claim regarding Galaxy governance tokens to continue. However, it dismissed the count against O’Neal for control person liability, reasoning that merely being a founder did not equate to having power over management. Nonetheless, it denied the motion to dismiss on the argument that Astrals and Galaxy tokens were not “securities,” finding the plaintiffs had adequately pled their status at this stage.
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