FTX and other crypto firms are abandoning sports trades as the market crashes

Cryptocurrency companies poured billions of dollars into sports sponsorships in 2021 – but this year’s downturn has drained the flow of money, The Post has learned.

As a so-called “crypto winter” rolls in and companies try to cut costs, companies that spent big bucks on sporting goods stores over the past year are now trying to cut costs.

Crypto exchange FTX — which spent $135 million to rebrand the home of the Miami Heat in March 2021 — pulled out of talks to provide MLB’s Los Angeles Angels with a jersey patch in recent weeks, as the crypto market surged, sources with direct knowledge told The Post.

Another patch deal between the NBA’s Washington Wizards and a crypto company also fell through recently, the sources said.

Both deals were wiped out when the market collapsed, the sources said. The Washington Wizards patch has been seen as particularly desirable for crypto companies because of the participation of the politicians and regulators who oversee space in their games.

The angels declined to comment. FTX and the Washington Wizards did not respond to requests for comment.

Washington Wizard
The Washington Wizards also saw a crypto sponsorship deal fall through.
NBAE via Getty Images

Columbia University professor of sports management Joe Favorito told The Post he would be “shocked” if major new crypto sponsorships were awarded during the current downturn.

“The money that hasn’t been spent is being cut — just like we saw during the dot-com bubble,” he said.

The spending slump comes after major crypto exchanges secured sponsorship deals in 2021 to woo sports fans, many of whom were cashless in a tight job market, fresh on the heels of generous government stimulus from the pandemic.

In addition to renaming the Miami arena, FTX paid an undisclosed amount to become the MLB’s “official crypto exchange,” spending $20 million on an October ad campaign that starred Tampa Bay quarterback Tom Brady Buccaneers, and his supermodel wife Gisele Bundchen, and reportedly paid $6.5 million for a Super Bowl commercial starring Larry David, among many other sponsorships.

FTX Arena
Cryptocurrency exchange FTX paid $135 million last year to rename the home of the Miami Heat.
Shutterstock/Johnny Michael

While FTX hasn’t made any layoffs during the current crash, its founder Sam Bankman-Fried appears to have felt the pain of the current downturn as his net worth reportedly plummeted by billions.

FTX is far from the only crypto company that has spent heavily on sports deals.

In October, giant crypto exchange Coinbase paid an undisclosed sum to become the NBA’s “exclusive cryptocurrency platform partner.” In February, the company raised an estimated $14 million for a one-minute Super Bowl ad.

Last week, the morning after a TV commercial aired during the NBA finals, Coinbase laid off 1,100 employees — about 18% of its workforce. Coinbase shares are down around 75% this year.

Coinbase did not respond to a request for comment.

Similarly, Singapore-based exchange Crypto.com reportedly spent $700 million in November to rebrand Los Angeles’ Staples Center, where the Lakers and Clippers play. The company also invested heavily in a Super Bowl commercial starring LeBron James and another TV commercial starring Matt Damon.

Then, on June 10th, the privately held Crypto.com fire 260 employees, around 5% of the workforce.

Both Coinbase and Crypto.com attributed the cost-cutting measures to the current bear market, which saw Bitcoin fall below $20,000 over the weekend after flirting with $70,000 last November. Ethereum is down 70% from its highs and was trading around $1,100 on Monday.

Crypto.com Arena
Crypto.com spent $700 million to rebrand Los Angeles’ Staples Center last November.
Getty Images

The Post reported in November that crypto companies were forced to spend more money on sports sponsorships than companies in more established industries because arena owners and teams had bad memories of the dot-com bubble.

Two major stadiums — PSINet Stadium in Baltimore and CMGI Field in Boston — had to be renamed after their namesakes imploded in 2001.

Despite the current turmoil, there is no indication that Crypto.com or FTX are currently attempting to back out of their stadium naming rights deals, according to Chris Lencheski, a former Comcast executive and an associate professor in Columbia’s School of Professional Studies University who worked on arena name offerings.

Sam Bankman Fried
FTX is run by Sam Bankman-Fried, who is also a major donor to the Democrats.
CQ-Roll Call, Inc via Getty Imag

But if either company wanted to back down, it would likely be forced to pay hefty costs, Lencheski told The Post. While the professor said he wasn’t privy to the details of the Crypto.com or FTX Arena deals, he said he’s worked on deals in the past that required a company to pay out 55% of the remaining pact to get out to get out of a deal.

Under such conditions, if Crypto.com backed out of its 20-year, $700 million contract, the company would be on the hook for a whopping $385 million.

“There is always a negotiated exit option,” said Lencheski. “But it must hurt. The reason it must hurt is that the building still sustained damage.”

Both Lencheski and Favorito found that removing a dead or damaged company’s name from a stadium can damage a franchise’s brand and reduce the facility’s appeal to future sponsors.

A Crypto.com spokesperson said in a statement to The Post, “We remain focused on investing resources in product and engineering capabilities to create world-class products, as well as in our strategic esports partnerships and believe they will continue to do so.” will play a critical role in our mission to accelerate the global cryptocurrency transition.”

Changpeng Zhao, the CEO of Binance — the world’s largest crypto exchange — appeared to mock his rivals for spending heavily on sports stores in a tweet last Wednesday, shortly after Coinbase and Crypto.com announced the layoffs.

“A few months ago it wasn’t easy to say no to Super Bowl advertising, stadium naming rights and big sponsorship deals, but we did it,” the CEO wrote. “Today we are hiring for more than 2,000 open positions.”

.

Leave a Comment