MIAMI — FTX founder Sam Bankman-Fried got a thumbs up from Miami Mayor Francis Suarez during a joint appearance last year when an interviewer asked the 29-year-old mogul if a crypto company approaching a $25 billion valuation really had the financial staying power to fund the full 19 years on its $130 million sponsorship deal for the city’s basketball arena.
“It’s been a pretty good year for us, to the point that, frankly, we don’t need to rely on the other 18 years to have the funds for this,” Bankman-Fried said during the May 7 event at the 2021 Ethereal Virtual Summit. Bankman-Fried described a “phenomenal year” for the crypto industry “and us, in particular.”
What a difference 18 months can make.
On Friday, Bankman-Fried announced bankruptcy proceedings for the FTX empire he launched just three years ago, vaulting from startup to a crypto exchange with enough cash to replace American Airlines as the title sponsor for the county-owned NBA arena where the Miami Heat play.
Now Miami-Dade County administrators doubt FTX can afford its next $5.5 million payment on the arena, much less the remaining $100 million on a deal that Bankman-Fried brushed aside as a minor expense in his appearance with Suarez.
On Friday night, Miami-Dade County and the Heat issued a joint statement to announce they are taking action to terminate their business relationships with FTX and will work together to find a new naming rights partner for the arena.
“The reports about FTX and its affiliates are extremely disappointing,” the statement read. “Miami-Dade County and the Miami Heat are immediately taking action to terminate our business relationships with FTX, and we will be working together to find a new naming rights partner for the arena. 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.”
Even as the process begins to find a new naming rights partner, the building will still be referred to as FTX Arena until further notice, according to a person familiar with the evolving situation.
The FTX collapse also brings a reminder of the bust potential behind Miami’s broader crypto buzz, a sensation that has helped fuel Suarez’s ambitions as a potential contender for the 2024 Republican presidential nomination. With Bankman-Fried’s FTX fortune making Miami the first NBA city with a crypto-labeled sports arena, his fall will leave Miami sports fans the first forced to learn a new stadium name because of a crypto collapse.
“I hope the next time we have someone who wants to put their name on the arena, we have a better vetting process,” said Miami-Dade Commissioner René Garcia, who cast the only vote against the FTX deal when it came up for a board vote on March 26, 2021.
$20 million received but $5.5 million due soon
The front-loaded agreement required FTX to pay nearly $20 million in the first two years of the deal, and Miami-Dade said this week that money has been received. But the office of county Mayor Daniella Levine Cava is already warning a court fight will be coming if FTX doesn’t make the 2023 installment of $5.5 million that’s due on Jan. 1.
“Should FTX be unable to meet their financial obligations under the naming rights deal, the County will explore all legal remedies,” Levine Cava’s office said in a statement this week.
FTX made billions as as an exchange where investors could buy and sell digital currencies, such as Bitcoin, that exist on a decentralized computer network known as the blockchain. FTX entered into a crisis when it wound up short on cash to match customers’ holdings, an unraveling that accelerated this week and threatened to spread to other crypto companies.
As mayor of Miami’s city government, Suarez had no role in negotiating the county arena deal. But he was thanked by Bankman-Fried for helping make Miami a natural fit for FTX, given Suarez’s promotion of electronic currency as part of the city’s push to lure tech and financial firms. And Suarez embraced the new FTX Arena as a vote of confidence in his quest to make Miami “the most crypto-friendly city on the planet.”
During his video appearance at the “Miami Crypto City” virtual panel with Bankman-Fried, Suarez called the FTX arena deal “a huge turning point.”
“I do think this that this is the future of our world,” Suarez said. “If we want to be a tech city in Miami, we have to take advantage of these opportunities to differentiate ourselves and to get ahead of our competition.”
Miami’s crypto position isn’t necessarily in peril
Crypto optimists see the FTX failure as the kind of carnage that can hit any industry, with Miami still well positioned for the next wave of digital-currency good fortune.
For last spring’s Bitcoin Conference in Miami Beach, the Plantation-based crypto trading firm TradeStation commissioned a 3,000-pound statute of a bull with laser eyes dubbed the “Miami Bull.” It remains on the downtown campus of Miami Dade College.
“It was making a statement. That the future of finance is in Miami, and the future of finance is based on the blockchain,” said Luis Gazitua, a Miami lobbyist who represented Trade Station in getting the statue placed. “And it still is.”
Miami wouldn’t be the first city to see its sports geography altered by a corporate meltdown. Houston’s Enron Field lasted two years before the energy giant went under, and a similar fate hit Tennessee’s Adelphia Coliseum when that sponsor went bankrupt.
On Friday, West Realm Shires Services, the Bankman-Fried entity that signed the Miami-Dade deal, filed for Chapter 11 bankruptcy protection. Bankman-Fried also resigned as CEO of the corporate empire he formed. Bloomberg reported Bankman-Fried, now age 30, saw his $16 billion fortune of financial assets collapse to zero this week.
A bankruptcy is a cause for default in the county’s agreement, allowing Miami-Dade to terminate the agreement within 30 days.
Lack of an arena sponsor can get expensive for Miami-Dade, which is using the $5 million a year in FTX revenue to fund neighborhood programs to reduce gun violence.
Miami-Dade’s agreement with the Heat requires the county to pay the team $2 million in connection with naming rights, even if no arena sponsor exists. When American Airlines declined to renew its sponsorship deal in 2020, Miami-Dade went more than a year without a replacement until a consultant landed FTX.
That put FTX’s logo on the Heat court and, weeks ago, atop the facility’s roof, replacing the jet silhouette from the sponsor that made it the AA Arena since the waterfront building opened with a Gloria Estefan concert on New Year’s Eve in 1999.
As the second naming-rights sponsor, FTX will now likely end up with the most short-lived arena deal in Miami. It was a risk the Levine Cava administration acknowledged when pitching the agreement to commissioners last year.
“We of course recognize there is risk in this deal,” Levine Cava chief deputy Jimmy Morales told the board, “particularly with a relatively new company in a relatively new industry.”
