Advisers from FTX Group are exploring options to retrieve millions paid to famed figures such as Shaquille O’Neal and Naomi Osaka for promoting Sam Bankman-Fried’s crypto platform prior to its downfall.
Financial consultants appointed by FTX are scrutinizing the compensation given to these sports icons to see if they can be reclaimed under regulations that permit companies to annul transactions made shortly before entering Chapter 11 bankruptcy, according to Bloomberg, which referenced court filings.
Although the current information doesn’t offer a complete picture of FTX’s endorsement expenditures, it does reveal the strategy behind Bankman-Fried’s use of star athletes, MLB teams, NBA franchises, and Formula 1 to bolster its brand recognition.
The degree to which FTX consultants think these payments can be taken back, or if any of the celebrities or teams have voluntarily proposed returning the money, is yet to be ascertained.
FTX’s statements indicate that many of the payments made to athletes, teams, and leagues were upfront amounts linked to advertising or sponsorship deals.
Yet, the exchange has warned that the financial reports might not cover everything, owing to insufficient record-keeping practices.
John J. Ray III, the newly appointed CEO of FTX, conceded that when the company filed for Chapter 11, they didn’t have a full grasp of their financial situation and lacked comprehensive financial documentation.
FTX has also recognized the chance that certain athletes, teams, or entities might have pulled out or compensated for deposits prior to the declaration of bankruptcy.
FTX Paid Millions to Professional Athletes and Teams
FTX’s records show they disbursed around $4.9 million to MLB, in return for umpires sporting the FTX logo patches for a specified duration.
They further disclosed an amount of about $12.2 million linked to their collaboration with the Formula 1 team, Mercedes-AMG Petronas.
Payments to the NBA’s Golden State Warriors amounted to $3.4 million, with close to $242,000 directed towards Stephen Curry’s venture, SC30 Inc.
FTX pointed out that some payments made to Formula 1 and the Golden State Warriors might be subject to retraction under Chapter 11 regulations.
Alvarez & Marsal, the financial consultant for FTX, is said to be considering the rollback of payments to the Warriors. This includes a significant $2 million transaction made roughly a month before FTX’s bankruptcy declaration.
In the previous year, an FTX subsidiary, West Realm Shires Services Inc., reported a payment of $2.5 million to a branch of Authentic Brands Group connected to O’Neal.
This same subsidiary disclosed a payment of $2 million to Osaka on November 9, 2022. This came just two days before Bankman-Fried stepped down, followed by the company’s bankruptcy announcement.
FTX recorded a total of about $4.3 million in transactions to O’Neal and his associated ABG venture, and around $3.2 million to Osaka, all in the context of partnership and endorsement agreements with FTX.
Among other notable figures in FTX’s records is Trevor Lawrence, the Jacksonville Jaguars’ quarterback. He is reported to have been paid $500,000 in September 2022.
Furthermore, FTX unveiled transactions amounting to roughly $600,000 made to former Boston Red Sox athlete David Ortiz and his philanthropic endeavor. Ortiz’s charity is dedicated to facilitating heart surgeries for children in the Dominican Republic and New England.
FTX’s recent revelations come in the wake of their legal proceedings against Kives and his VC firm, K5, in an attempt to retrieve an estimated $700 million invested by Bankman-Fried.
The lawsuit suggests that Bankman-Fried was an “extravagant supporter,” channeling millions to Kives, K5 Global, and Baum, spurred by a social gathering Kives hosted in 2022.
FTX is pursuing the recovery of monies moved from Alameda Research to SGN Albany Capital, as well as funds transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital.