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Sam Bankman-Fried, the former CEO of cryptocurrency exchange FTX, is having a rough go of it, to say the least.
The 30-year old executive’s company, launched in 2019, has in recent days watched as his company’s $32 billion valuation evaporated overnight. So far FTX’s clients have lost an (estimated) combined $2 billion, and counting and on Nov. 11, the company filed for Chapter 11 bankruptcy, claiming it had over 100,000 creditors.
But back when FTX’s marketing budget seemed to know no bounds, the company pumped hundreds of millions into myriad potentially lucrative sports deals. One of which included a $210 million naming rights agreement with Santa Monica-based championship esports team Team SoloMid (TSM) that was inked last July.
The pact, the biggest in esports history, was part of FTX’s overall strategy to become a household name. Typically, these deals work out well for the sponsors. In the past, brands that back top esports teams have doubled their returns.
In addition to gaining the cash attached to the deal, TSM had also hoped the FTX sponsorship would lend it further legitimacy. As one of the first big esports teams to court such an arrangement it was, at the time, a sign that the pro gaming industry was becoming mainstream, and worth big brand investment.
Today, however, that trajectory appears to be in jeopardy. In a tweet last weekend TSM implied it hasn’t yet heard from FTX and noted it had no updates beyond what’s been publicly reported. The esports team owner added, “we are currently consulting legal counsel to determine the best next steps to protect our team, staff, fans and players.”
A TSM spokesperson told dot.LA the company didn’t have more to share beyond its tweet but that it's closely monitoring the situation with FTX.
So what could happen to the esports company as a result of this mess?
For starters, a name change is not out of the question. But such measures depend on the terms of the sponsorship agreement – for now since the deal is still active, TSM still has to compete under the name TSM FTX. Given, however, that FTX has become a dirty word in the business world, it’s likely the esports team will look to change that soon.
Of course, the deal between TSM and FTX is hardly the only sports sponsorship deal.
FTX almost sponsored the Los Angeles Angels MLB team (and Angels’ powerhouse Shohei Ohtani took a stake in the company, becoming a “global ambassador”) but backed out this June. To that end, Major League Baseball signed a five-year deal to name FTX the league’s official cryptocurrency exchange last summer. The worth of that agreement wasn’t disclosed, but it’s only a matter of time before the MLB begins to seek out the money they’re owed.
Last June, FTX also agreed to pay $135 million to the Miami Heat for exclusive naming rights over 19 years. This week, however, the team terminated that contract this and said it will search for new partners. Mercedez Mercedes’ Formula One racing team announced they too would suspend their partnership with FTX and take the crypto company’s name and logo off its cars.
Even the University of California has FTX ties. Last August, FTX signed a $17.5 million contract to sponsor Cal Athletics for 10 years, including naming rights to the California Memorial Stadium.
In August, we reported that the future of crypto companies sponsoring sports teams was dubious at best. This was shortly after crypto exchange Voyager had prematurely exited a deal with the National Women’s Soccer League after filing bankruptcy.
As such, following this FTX debacle, scrutiny has turned to other exchanges like Coinbase and Crypto.com where withdrawals have recently spiked. Crypto.com CEO Kris Marszalek was even forced to put out a statement in response to claims by some customers facing longer than average wait times for withdrawals.
In light of the FTX news, however, TSM continues to say it is “stable and profitable” and forecasts it will remain that way for the near future. But one thing is clear, the next time TSM goes looking for a sponsorship, chances are it won’t look for another crypto firm to foot the bill. -Samson Amore
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What We’re Reading...
--Elon Musk's SpaceX just bought a big ad campaign for Elon Musk's Starlink to run on Elon Musk's Twitter. Big "two corpses, everything's fine" energy.
--Influencers are feeling the sting as Q4's holiday buying boom fails to materialize. Thanks, recession.
--Amazon joined Twitter and Meta in pre-holiday layoffs, with an estimated 10k in staffing cuts across its white collar divisions.
-- Bird was apparently overstating its shared e-scooter revenue for two years. Just in case you thought it was only crypto, social media and ecommerce currently imploding the tech sector.
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