FTX Group, a cryptocurrency platform founded by Sam Bankman-Fried, is currently investigating the possibility of reclaiming millions of dollars paid to celebrities and athletes for their endorsements before the company’s collapse. Financial advisers hired by FTX are examining the payments made to these individuals to determine if they can be recovered under the rules that allow companies to reverse transactions executed just before filing for Chapter 11 bankruptcy.
While the details of FTX’s endorsement spending have not been fully disclosed, it is clear that Bankman-Fried’s empire leveraged the fame of celebrity athletes, Major League Baseball (MLB), National Basketball Association (NBA) teams, and Formula 1 to enhance its brand visibility. The extent to which FTX advisers believe the payments can be recovered, as well as whether any athletes or teams have already offered to return the funds, remains unknown.
FTX’s disclosures reveal that substantial amounts were paid to various professional athletes and teams. For example, approximately $4.9 million was paid to MLB, which required umpires to wear FTX logo patches for a certain period. The company also disclosed at least $12.2 million in payments related to partnership agreements with the Formula 1 racing team Mercedes-AMG Petronas.
Furthermore, FTX revealed $3.4 million in payments to the NBA’s Golden State Warriors and nearly $242,000 in payments to Stephen Curry’s business, SC30 Inc. Alvarez & Marsal, FTX’s financial adviser, has analyzed the possibility of undoing payments to the Warriors, including a $2 million transfer made approximately a month before FTX filed for bankruptcy.
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Last year, FTX affiliate West Realm Shires Services Inc. disclosed that it paid $2.5 million to an Authentic Brands Group subsidiary associated with Shaquille O’Neal. The same affiliate also paid Naomi Osaka $2 million just two days prior to Bankman-Fried’s resignation and the subsequent bankruptcy filing. FTX attributed approximately $4.3 million in payments to O’Neal and his ABG business and approximately $3.2 million to Osaka for partnership and endorsement deals.
Other athletes mentioned in FTX’s disclosures include Trevor Lawrence, the quarterback for the Jacksonville Jaguars, who allegedly received a $500,000 payment in September 2022. FTX also disclosed payments of around $600,000 to retired Boston Red Sox player David Ortiz and his charity, which supports children’s heart surgeries.
It is noteworthy that these disclosures come in the wake of FTX’s legal action against Kives and his venture capital firm, K5, to recover an estimated $700 million that Bankman-Fried had invested. The complaint alleges that Bankman-Fried sent millions to Kives, K5 Global, and Baum after attending a social event hosted by Kives in 2022. FTX is seeking the return of funds transferred from Alameda Research to SGN Albany Capital and funds transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital.
It is important to note that FTX’s financial disclosures may not be comprehensive due to a lack of detailed record-keeping. The company’s new CEO, John J. Ray III, has acknowledged that FTX lacked reliable financial information at the time of filing for Chapter 11 and did not maintain complete financial records. FTX also acknowledged the possibility that athletes, teams, or other parties may have withdrawn or offset deposits before the bankruptcy filing.
In conclusion, FTX Group advisers are currently investigating the possibility of reclaiming millions of dollars paid to celebrities and athletes for their endorsements before the company’s collapse. The extent to which these payments can be recovered and whether any athletes or teams have offered to return the funds remains unknown. FTX’s disclosures reveal significant payments made to professional athletes and teams, and it is yet to be determined if these payments can be reversed under Chapter 11 bankruptcy regulations. The outcome of this investigation may have implications for the future of endorsement practices in the cryptocurrency industry.
