Miami-Dade County and the Miami Heat announced Friday they will be terminating their business relationship with FTX following the news the cryptocurrency exchange will be filing for bankruptcy.
In a joint statement, the county and NBA team said they intend to find a new naming rights partner for the arena.
“The reports about FTX and its affiliates are extremely disappointing,” the statement read in part.
As the cryptocurrency market plunges, the CEO of FTX, Sam Bankman-Fried, also resigned.
According to the FTX naming rights contract with the county government, staff can terminate the contract over the company’s default and begin the search for another sponsor.
To some, it’s similar to bank runs back at the start of the Great Depression. People used U.S. dollars to buy cryptocurrency through FTX, using it like a bank. FTX then used that money to make some questionable financial decisions, overleveraging their own created cryptocurrency.
It scared off another major company looking at purchasing the entire company, Binance.
When Binance decided not to buy FTX because of the financial questions, people made a run on the company, taking their deposits out.
Now, the company is $8 billion underwater and announced it will file for bankruptcy — which jeopardized the future of FTX Arena’s name.
The company behind the name of the FTX Arena announced it will file bankruptcy as the cryptocurrency market plunges. NBC 6’s Phil Prazan reports
“It’s an evolving situation for FTX,” Miami-Dade County Mayor Daniella Levine Cava said before announcing the county cut ties with FTX. “Obviously, we’re closely monitoring it and exploring all possible avenues to prepare ourselves. We’re not concerned in the short term but obviously, we need to make sure we have a company with naming right for the arena.”
On page 87 of the contract between the FTX affiliate and the county, the parties agreed that in case of a default the county can terminate the agreement, find a new name sponsor, and try to get damages through the bankruptcy process.
The last part may be difficult because the bankruptcy process will need to unravel $8 billion in liabilities.
This all happened weeks away from a key deadline for the company to pay $5.5 million under the deal.
Miami-Dade County commissioners approved it only about a year and a half ago. It was supposed to be a deal for 19 years with the county getting $90 million in total.
Now, it looks like the county won’t even get $10 million after the Miami Heat and the contract brokers get their cut.
Levine Cava had big plans for the windfall, creating a safety program to stop youth gun violence called the “Peace and Prosperity” plan. The program dedicated money to the Park Department’s Fit 2 Lead program 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 important programs in the years ahead,” the county and the Heat said in their statement Friday night.
Levine Cava wrote in an earlier statement that she was still committed to the program.
“Should FTX be unable to meet their commitment to the County, we will work to identify alternate funding to close the gap in the short term to continue funding our Peace and Prosperity programming, including Fit2Lead,” she wrote.
The name of the FTX Arena has an uncertain future after the cryptocurrency exchange filed for bankruptcy. NBC 6’s Ari Odzer reports
Commissioner Rene Garcia was the only county commissioner to vote against the deal, arguing in March 2021 the county moved too fast. He wonders now if the gun violence prevention programs may be in jeopardy without another source of money.
“I think this is a good lesson for all of us that we should rush into these multiyear multimillion-dollar contracts,” said Commissioner Garcia. “We should do a much better job at vetting these companies, especially these companies who have only been in this country for a year.”
One winner from all this was the contract broker, the Superlative Group, who’s been paid and gets to keep almost $3.5 million.
Kurt Wuckert Jr. is the bitcoin historian for coingeek.com and tells NBC 6 he’s not surprised by this latest failed company.
“This has happened a bunch of times,” said Wuckert. “You have insiders who control the money in ways you don’t understand, they take customer deposits and they figure out ways to make money with them, which is the kind of thing that is regulated against in the banking economy.”
The CEO of FTX, Sam Bankman-Fried, did apologize online Friday and resigned from his post as CEO. It’s unclear whether people who used FTX will have access to their US Dollars or their cryptocurrency.
“I think the lesson is, is when it’s too good to be true or sounds too good to be true, it probably is,” said Wuckert.