Maybe Tom Brady really is already lost his touch. As the Tampa Bay quarterback struggled through a 4-5 season, one of his top endorsers, cryptocurrency FTX exchange platform, unraveled in epic fashion this week. FTX filed for bankruptcy on Friday, leaving Brady and some of the other biggest brands in sports to pick up the pieces.
Not long ago, FTX was one of the largest crypto startups in the world, valued at $32 billion (or roughly the value of every National League baseball team, combined). The founder, 30-year-old MIT graduate Sam Bankman-Fried, known as SBF, compared to Warren Buffet and John Pierpont Morgan.
FTX separates itself from its competitors by forging deep relationships with Washington power players—and doing some terrific sports deals. Brady and Gisele Bündchen starred in a $20 million commercial blitz last football season in exchange for stock in the company. (Friday’s news may mean less worry during the divorce process). But while the campaign seeks to introduce FTX to a nation of soccer fans, sports executives are familiar with the brand.
In March 2021, FTX signed a 19-year, $135 million naming rights agreement for the home of the Miami Heat — an agreement that has has paid about $20 million. In August, FTX signed a $17.5 million stadium sponsorship deal for California Memorial Stadium in Berkeley. And in between, buy a patch of real estate on every MLB umpire’s chest through a deal with the league. It also signed deals with the Golden State Warriors and Monumental Sports’ Washington Wizards and Capitals. Many of the deals are being done through a US operation that is allegedly separate from FTX, although the American arm includes about 130 entities that will also be going through the Chapter 11 process.
Steph Curry, Shohei Ohtani and Naomi Osaka are among the other star athletes to sign FTX deals. As is often the case these days, most of these agreements come with equity in companies—contracts that are now incompatible with signed digital paper.
For reasons that still remain somewhat opaque, the FTX unraveling took place in just a few days. On Sunday, users withdrew $5 billion from the exchange after the report, and affiliated hedge funds, lacked confidence in its finances. On Thursday, FTX faced reports of a funding shortfall of up to $8 billion after a failed attempt to be acquired by competitors, and the SBF announced that the company would do “everything possible to raise liquidity.” Friday, he resigned.
The news is likely to precipitate the unwinding of all FTX’s sports efforts. The Mercedes F1 team was first out of the gate, telling Motorsport.com who removed the company logo from the car ahead of the Brazilian GP on Saturday.
This, of course, will be far from the first sports sponsorship deal has gone poof.
During the dot-com crash, many venues – the Adelphia Coliseum in Nashville, PSINet Stadium in Baltimore – had to be renamed. Most recently, Sports Authority Field and Chesapeake Energy Arena did not hold up to contract terms.
“People have been through this before and are smart about how to create these partnerships,” said GMR Marketing executive vice president Todd Fischer. “He entered this new category with his eyes open.”
Looking specifically at crypto sponsors, the category cooled earlier this week amid industry contraction. Although for some odd reason sports entities want to sign up for crypto sponsorships amid this week’s turmoil, it will be hard to find established companies willing to increase their marketing spend.