Following the revelation that FTX would file for bankruptcy, Miami-Dade County and the Miami Heat stated on Friday that they will terminate their commercial partnership with the cryptocurrency exchange.
The county and NBA club said in a joint statement that they want to find a new naming rights partner for the facility.
The statement said in part, “The revelations regarding FTX and its affiliates are highly disheartening.”
Sam Bankman-Fried, the CEO of FTX, resigned concurrently with the decline of the bitcoin market.
According to the FTX naming rights deal with the county government, staff may cancel the contract and begin searching for a new sponsor if the firm defaults.
Some compare it to bank runs at the beginning of the Great Depression. People used FTX as a bank to purchase cryptocurrencies using U.S. money. FTX then utilized the funds to make dubious financial moves, including excessive leverage on their own coin.
It frightened away Binance, a significant firm that was interested in acquiring the whole company.
When Binance opted not to purchase FTX due to financial concerns, there was a run on the firm, and deposits were withdrawn.
Now, the corporation is $8 billion in debt and has declared it will file for bankruptcy, putting the FTX Arena’s brand in jeopardy.
Before declaring that the county has severed connections with FTX, the mayor of Miami-Dade County, Daniella Levine Cava, said, “FTX’s condition is developing.” “It goes without saying that we’re keeping a close eye on the situation and evaluating all conceivable preparation options. We are not worried about the stadium’s name rights in the near term, but we do need to secure a sponsor for the facility.”
On page 87 of the contract between the FTX affiliate and the county, the parties agreed that in the event of a default, the county may cancel the agreement, seek for a new naming sponsor, and attempt to recover damages via the bankruptcy process.
The next step may be challenging since $8 billion in obligations must be unraveled during the bankruptcy process.
All of this transpired weeks before a crucial deadline for the corporation to pay $5.5 million per the terms of the agreement.
It was authorized by the Miami-Dade County commissioners less than a year and a half ago. The agreement was scheduled to last 19 years, with the county receiving a total of $90 million.
Now, it seems that the county will not get even $10 million once the Miami Heat and contract brokers take their respective cuts.
Levine Cava had grand intentions with the windfall, devising the “Peace and Prosperity” plan to prevent teenage gun violence. The initiative allocated funds to the Fit 2 Lead program of the Park Department and to the Miami-Dade Police department.
“We are proud of the impact our Peace & Prosperity Plan — sponsored by County Commissioner Keon Hardemon and funded through the original deal — is already having in preventing violence and creating opportunity for young people across Miami-Dade, and we look forward to identifying a new partner to continue funding these vital programs in the coming years,” the county and the Heat said in a statement released Friday night.
Levine Cava said in a previous statement that she remained dedicated to the initiative.
“Should FTX be unable to fulfill their promise to the County, we will try to secure other funds to fill the short-term financial gap in order to continue supporting our Peace and Prosperity programs, including Fit2Lead,” she wrote.
Rene Garcia was the lone county commissioner to vote against the agreement in March 2021, citing that the county was moving too quickly. Currently, he questions whether the gun violence prevention initiatives are in peril for lack of an alternative funding source.
Commissioner Garcia said, “I believe this serves as a lesson for all of us not to rush into these multiyear, multimillion-dollar contracts.” We should do a far better job of evaluating these firms, particularly those that have been in the nation for less than a year.
The contract broker, the Superlative Group, has been paid and will retain over $3.5 million as a result of this.
Kurt Wuckert Jr., the bitcoin historian for coingeek.com, told NBC 6 that he is not surprised by the failure of this latest company.
“This has occurred several times,” Wuckert said. “You have insiders who control the money in ways you don’t comprehend; they take customer deposits and figure out ways to profit from them, which is the type of behavior that is regulated in the banking economy.”
Sam Bankman-Fried, the CEO of FTX, issued an online apology and resigned on Friday. Uncertainty exists as to whether users of FTX will have access to their US Dollars or their cryptocurrency.
When something is too good to be true or sounds too good to be true, it probably is, according to Wuckert.
