Financial advisers working with FTX Group have launched an investigation into the possibility of reclaiming millions of dollars paid to celebrities, including Shaquille O’Neal and Naomi Osaka, for their endorsements of Sam Bankman-Fried’s cryptocurrency platform before its collapse. This intriguing financial inquiry aims to ascertain whether these payments can be recovered under the rules allowing companies to reverse transactions executed just prior to filing for Chapter 11 bankruptcy. In this comprehensive article, we delve into the details of FTX’s endorsement spending and the complexities surrounding this investigation.
FTX’s Celebrity Endorsement Strategy
FTX’s celebrity endorsement strategy came under scrutiny as financial advisers hired by the company began analyzing the payments made to high-profile athletes. While the full scope of FTX’s endorsement spending is not yet clear, these disclosures shed light on how the crypto platform leveraged the fame of celebrity athletes, Major League Baseball (MLB), National Basketball Association (NBA) teams, and Formula 1 to bolster its brand visibility.
The extent to which FTX advisers believe these payments can be recovered remains uncertain. It’s also unclear whether any athletes or teams have expressed willingness to return the funds. FTX’s disclosures describe many of these transfers as prepayments associated with advertising or sponsorship agreements. However, the lack of detailed record-keeping has led to a degree of ambiguity in the financial disclosures.
FTX’s Financial Challenges
FTX has acknowledged that it lacked reliable financial information at the time of filing for Chapter 11 bankruptcy and had not maintained complete financial records. The exchange has also noted the possibility that athletes, teams, or other parties may have withdrawn or offset deposits before the bankruptcy filing.
FTX’s disclosures provide insight into the substantial sums paid to professional athletes and teams. For instance, approximately $4.9 million was paid to MLB for the wearing of FTX logo patches by umpires. FTX also disclosed payments amounting to at least $12.2 million related to partnership agreements with the Formula 1 racing team Mercedes-AMG Petronas.
The NBA’s Golden State Warriors received $3.4 million from FTX, while Stephen Curry’s business, SC30 Inc., received nearly $242,000. FTX has indicated that a portion of the Formula 1-related payments and payments to the Golden State Warriors may potentially be reversed under Chapter 11.
Specific Athlete Payments
FTX’s disclosures revealed substantial payments to individual athletes. For example, FTX attributed approximately $4.3 million in payments to Shaquille O’Neal and his ABG business and approximately $3.2 million to Naomi Osaka for FTX partnership and endorsement deals. Trevor Lawrence, the quarterback for the Jacksonville Jaguars, allegedly received a $500,000 payment in September 2022. David Ortiz, the retired Boston Red Sox player, received payments of around $600,000 for his charity, which supports children’s heart surgeries.
Legal Actions and Complexities
These disclosures come in the wake of FTX’s legal action against Kives and his venture capital firm, K5, to recover approximately $700 million invested by Sam Bankman-Fried. FTX’s complaint characterizes Bankman-Fried as a “profligate patron” who transferred millions to Kives, K5 Global, and Baum following a social event in 2022.
The investigation into the recovery of pre-collapse payments to celebrities endorsing FTX raises intriguing questions about the complexities of financial transactions, celebrity endorsements, and bankruptcy proceedings. As this inquiry unfolds, it provides a glimpse into the intricate web of financial interactions within the crypto industry.
