Mercedes F1 announced the suspension of the Formula 1 sponsorship deal with cryptocurrency exchange FTX following its Chapter 11 bankruptcy filing. The Mercedes suspension could be one of several sports sponsorships to get canceled after FTX signed lucrative sports deals valued at hundreds of millions of dollars.
“As a first step, we have suspended our partnership agreement with FTX,” said Mercedes, according to Autosport. “This means the company will no longer appear on our race car and other branded assets from this weekend. We will continue to monitor closely the situation as it evolves.”
Before its collapse, FTX made big bets on sport to raise its profile, especially in the United States. By 2022, FTX held partnerships with leagues and players across multiple sports, including big names such as the NBA Warriors, Miami Heat, the MLB, and the MLB all-star player Shohei Ohtani. The sponsorships were high-valued, with the naming rights for the Miami Heat stadium valued at $135 million over 19 years. On Friday, Miami Heat and Miami-Dade County said they were terminating the deal. Thus, the collapse of FTX has a major impact on customers and also puts some of its sports industry partners in a precarious position.
The FTX catastrophe has also resulted in added scrutiny and calls for transparency for other crypto companies. This weekend, crypto exchange Crypto.com acknowledged that the exchange erroneously sent roughly $400 million in October to rival exchange Gate.io, which was later recovered. Despite being far smaller than FTX, Crypto.com has made even larger investments in sports sponsorship, including the 2022 FIFA World Cup, making Crypto.com an exclusive cryptocurrency trading platform for this year’s largest sporting event. It also had a naming rights deal for a sports arena, which was valued at $700 million. And it has a $100 million deal with the organizers of F1, amongst others.
In the case of FTX, the sports sponsorship was cited as a competitor as a warning sign. Jesse Powell, CEO of cryptocurrency exchange Kraken, labeled “huge ego purchases, like 9-fig sports deals,” as a red flag in a thread of tweets. “The damage here is huge,” continued Powell. “An exchange implosion of this magnitude is a gift to bitcoin haters all over the world … We’re going to be working to undo this for years.”
These are not the first crypto sponsorships to be canceled. Earlier in 2022, Formula One team McLaren Racing, football teams Sporting Lisbon and Italy’s Spezia terminated their sponsorship agreements with Turkish crypto company Bitci. Reports highlighted that Sporting Lisbon’s decision was due to Bitci’s failure to make payments.