So much for FTX Arena
On Saturday night, the Miami Heat defeated the Charlotte Hornets, 132-115, winning what appears to be the final game played at FTX Arena. The Heat signed a 19-year, $135 million naming rights deal with the cryptocurrency exchange in April 2021, but as said, the cryptocurrency exchange is now bankrupt, the Heat and Miami-Dade County are pulling the plug as soon as possible. “The reports about FTX and its affiliates are extremely disappointing,” say the team and the county in a joint statement. “Miami-Dade County and the Miami Heat are taking immediate action to end our business relationship with FTX. We will work together to find a new naming rights partner for the arena.” As always, the rotation of the company’s stadium nomenclature continues.This is what it looks like in practice.
Since we last checked in on Sam Bankman-Fried, his and his company’s twin collapses have only accelerated. According to a report by CoinDesk, FTX was essentially run (on the ground) by a “caval of roommates”, a group of 10 people whose bona fides were mainly that they knew or had dated Sam Bankman-Fried. This group includes Caroline Ellison, CEO of Bankman-Fried’s crypto hedge fund Alameda Research, as follows The Wall Street Journal, monitored Alameda during the tumultuous period when it rescued Voyager in the wake of the Three Arrows Capital implosion. Alameda made a series of bad bets, which Bankman-Fried and FTX management tried to cover up by moving $10 billion in client funds from their exchange to their hedge fund. Between 1 and 2 billion dollars of these funds are simply missing. Subsequent reporting on the relationship between FTX and VC firm Sequoia, recently seen marks his FTX investment down as zeroshowed them passing the same hundreds of millions of dollars back and forth that they somehow invested in each other at the same time.
Alameda executives also revealed that the firm has $1.5 billion in other debt, and even now that the company has declared Chapter 11 bankruptcy, their Bahamas-based assets have been frozen, and the US government is going after them, this is crypto, so it is unclear whether anyone will be healed when the dust settles. Some money that people want surely don’t look again is the $515 million that was taken out of FTX in what appears to have been a hack. News of the hack was announced by new FTX chief John Jay Ray III, the former CEO of Enron.
When it became clear that FTX was not going to have enough money lying around to fulfill the remaining 17.5 years left on the arena deal, the Miami Heat dropped them, after collecting on an upfront payment of $14 million. They are not the only sports organization to distance themselves from FTX. The Mercedes Formula 1 team signed a deal with FTX last year to put their logo on the car and, even more embarrassingly, launch a series of NFTs; they ended their collaboration ahead of this weekend’s Brazilian Grand Prix. Cal’s football field and MLB umpires’ uniforms are also sponsored by FTX, and it is envisioned that those associations are ending as well. As part of their (now extremely funny) marketing push in early 2021, FTX wooed a bunch of star athletes to serve as pitchmen for their Ponzi scheme, most notably Steph Curry and Tom Brady. I really like this quote from Brady, who was paid in now worthless equity for the endorsement:
“It’s an incredibly exciting time in the crypto world and Sam and the revolutionary FTX team continue to open my eyes to the endless possibilities. This particular opportunity showed us the importance of educating people about the power of crypto while giving back to the community and the planet ours. We have the chance to create something really special here, and I can’t wait to see what we can do together.”
Thanks Tom! FTX was one of the biggest institutional players in crypto, so obviously its undignified downfall will reverberate throughout the economy. If the second largest exchange in the world, an exchange known for being a backstop to the industry and bailing out ailing crypto companies, burned all the money and died such a grim death, why would you think any of this is legit? Several exchanges have promised to be more transparent in the wake of FTX’s collapse, a process that in one notable and sports-related case has backfired. Crypto.com last week attempted to show proof of reserves (a number that is not as immune to manipulation as it seems) and noted that it recently botched a $400 million transaction and sent it to the wrong wallet. It got the money back, but the fact that so much money was being moved around in the first place raised some serious questions whether it actually had sufficient reserves to cover everyone, and many customers follow suit Binance guy’s advice and move their stuff from Crypto.com.
Like FTX, Crypto.com bet big on sports sponsorships, buying the jersey patch on the Sixers uniforms and agreeing to pay $700 million for 20 years of naming rights to the building formerly known as the Staples Center. When the crypto market started to empty earlier this year, I started emailing Anschutz Entertainment Group, the owners of the arena, with a simple question: Have the scheduled payments from Crypto.com come through? They have not responded to any requests for comment. But a company whose reserves consist of 20 percent Shiba Inu coins will surely not have any liquidity problems in the future.