Mercedes has suspended its Formula 1 sponsorship deal with troubled crypto exchange FTX, meaning the company’s logos will be removed from the team’s cars from the Brazilian Grand Prix onwards.
Against the background of a possible bankruptcy of the FTX exchange and an impending investigation by the US Securities and Exchange Commission (SEC) into alleged misuse of customer funds, Mercedes reacted overnight to the rapidly changing situation.
While it initially appeared the team would retain the FTX logos on its cars and facilities for the Interlagos weekend, a Mercedes spokesman confirmed to Motorsport.com in Brazil on Friday morning that they had halted the deal.
“As a first step, we have suspended our partnership agreement with FTX,” Said Mercedes. “This means the company will no longer appear on our race cars and other branded merchandise starting this weekend. We will closely monitor the development of the situation.”
This comes as a result of the feared collapse of FTX as the crypto exchange is in deep trouble. FTX faces bankruptcy if it is unable to raise billions of dollars to get out of a liquidity crisis that erupted at sister firm and hedge fund Alameda Research this week after huge cash withdrawals.
Multi-billion dollar hedge fund Alameda Research, which is 90 percent owned by FTX and makes most of its money exploiting cryptocurrency price differentials, is believed to be in financial trouble. Apparently, an attempt was made to compensate for this with customer funds.
The securities regulator in the Bahamas, where FTX is headquartered, announced on Thursday that it had frozen the assets of FTX Digital Markets. The company is accused of embezzling customer funds.
Alpine sponsor does not want to save FTX
An initial plan to bail out the company by rival exchange Binance, which is a sponsor of Team Alpine, fell through after just 24 hours over concerns about the size of the financial hole FTX is in. Around $8 billion is believed to be missing from FTX’s books.
As a result of the concerns raised, FTX panic withdrawals have increased even further, which has only exacerbated the liquidity crunch. In the financial world there is talk of a tremor in the crypto market, with comparisons being drawn with the spectacular failure of the US bank “Lehman Brothers”, which triggered a global financial crisis in 2008.
A statement from Binance said: “Initially we were hoping to assist FTX clients in providing liquidity, but the issues are beyond our control and ability to assist.”
After FTX bankruptcy: Crypto crash on stock exchanges
Reuters news agency has reported that the US Securities and Exchange Commission (SEC) is investigating FTX’s handling of customer funds and its crypto lending activities. The troubles at FTX, one of the most well-known crypto exchanges in the world, have triggered a meltdown in the crypto markets and pushed Bitcoin to its lowest price in two years.
The FTT token on the FTX exchange plummeted from a price of more than $25 earlier this week to a low of less than $2 as news of the troubles circulated and panic selling ensued. Since then it has recovered slightly.
FTX founder and CEO Sam Bankman-Fried still has hope that a bailout can be put in place to save the stock market, but there are doubts that it will be successful. That has fueled speculation about a premature end to the partnership with Mercedes, which the team confirmed in Brazil on Friday.
At the height of its success, FTX was involved in several high-profile sports sponsorships. These included a $135 million deal for the Miami Heats’ NBA Arena in Miami, which will be renamed the FTX Arena by 2040, and Major League Baseball’s official cryptocurrency token.
FTX has also signed a multi-year sponsorship deal with the Mercedes team, which was announced last September. Besides the FTX logos on the car and driver overalls, they have also worked on other projects including the launch of NFT.
At this year’s Miami Grand Prix, FTX held a large-scale promotion called “Off the Grid” in South Beach, which included live music and demonstrations of Mercedes show cars.
Discussing the FTX deal earlier this year amid questions about the risks Formula One teams were taking with the volatile crypto industry, Mercedes team boss Toto Wolff said it would have been wrong for the sport to ignore potential business opportunities would have.
“You can’t ignore modern technology” said Wolff. “It’s definitely an area that will grow. If we look back ten years from now, payments that take two days and cannot be made outside of working hours will be a relic of the past. And this is where cryptocurrencies come in.”
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