Cryptocurrency enthusiasts are reeling after the recent collapse of FTX, a major cryptocurrency trading firm. And they’re not the only ones shaken by the news.
FTX’s bankruptcy filing on Friday has also raised big questions for athletes and teams. For example, what will the Miami Heat’s arena be called now?
“FTX had entered into a number of sports-related deals, some of which are crumbling. The NBA’s Miami Heat and Miami-Dade County decided Friday to terminate their relationship with FTX, and will rename the team’s arena. Earlier Friday, Mercedes said it would immediately remove FTX logos from its Formula One cars,” The Associated Press reported.
What is FTX?
FTX is one of the world’s largest cryptocurrency exchanges. It allows cryptocurrency investors to exchange the digital coins they own for a different type of coin or for regular money, according to The New York Times.
FTX and its top competitor, Binance, “process the majority of all crypto trades in the world,” the article said.
Why did FTX go bankrupt?
FTX’s current financial problems stem from an abrupt drop in customer confidence. People began pulling their money out of the exchange earlier this month as rumors swirled that the company’s own cryptocurrency tokens, called FTT, were not as valuable as had been assumed.
“FTX scrambled to process requests for withdrawals, which amounted to an estimated $6 billion over three days. It seemed to enter a liquidity crunch, meaning it lacked the money to fulfill requests,” The New York Times reported.
At first, it seemed as if Binance would step in to save FTX by purchasing the vulnerable company. But then Binance announced the deal was off due to concerns about FTX’s financial practices.
“Binance announced it would no longer buy FTX, saying it had arrived at that decision ‘as a result of corporate due diligence.’ It also cited regulatory investigations and reports of mishandled funds,” The New York Times reported.
After losing Binance’s support, FTX and affiliated companies filed for bankruptcy on Friday.
“The week’s developments marked a shocking turn of events for (FTX founder Sam) Bankman-Fried, who was hailed as somewhat of a savior earlier this year when he helped shore up a number of cryptocurrency companies that ran into financial trouble. He was recently estimated to be worth $23 billion,” The Associated Press reported.
So what does FTX have to do with sports?
FTX’s bankruptcy filing sent shockwaves through the cryptocurrency world, driving down the price of bitcoin and other digital currencies, according to The Associated Press.
It also held repercussions for major sports leagues, since FTX had been a major sponsor of multiple teams and athletes.
According to Front Office Sports, FTX owned the naming rights to:
- The Miami Heat’s arena, which is owned by Miami-Dade County.
- The football stadium at the University of California, Berkeley.
And had major sponsorship deals with:
- Major League Baseball.
- Mercedes-AMG Petronia Formula One team.
- Tom Brady.
- Stephen Curry.
- Shohei Ohtani.
The Miami Heat and Miami-Dade County, as well as Mercedes, have already terminated or suspended their deals with FTX after the bankruptcy news. Other teams and athletes are still considering next steps, Front Office Sports reported.