Mercedes deletes FTX sponsorship amidst Crypto chaos

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When it was announced that Red Bull Racing had exceeded their cost cap for 2021, there was concern for legitimate reasons. How much did they over-spend and on what did they spend it?

Those questions were not the only good questions but certainly ones that needed to be asked in the FIA’s regulatory process. In the end, it seemed that Red Bull and the FIA disagreed on how certain expenses were classified ranging from catering to employee pay etc. The team were fined and they lost 10% of their wind tunnel time as a consequence.

The more concerning thing, from my perspective, was the leaked information out of the FIA that began during the Singapore Grand Prix weekend and was compounded by a leaked letter that McLaren’s CEO, Zak Brown, sent to the FIA. These leaks and continual innuendos were allowed to continue and the press jumped on the click-bait bandwagon with their own innuendos and fomentation of the situation.

No one was more vocal during the nascent days of these rumors than Mercedes boss Toto Wolff and he certainly poured fuel on the fire with his public statements about the non-certification status that Red Bull would be receiving well ahead of the official announcement from the FIA. The media promptly followed suit.

When the dust settled, Wolff was less vocal about the situation and the penalty but interestingly, he said:

“Beyond the sporting penalty and the financial penalty, which obviously resonates in the real world out there, there is a big reputational consequence,” said Wolff. “And that is why I believe no team is going to put a foot wrong over the line, because you don’t want to have your partners and your team dragged into this space. “We’re living in a transparent, compliant world. Everything needs governance, and the sport needs it. As a sport overall, this is the real achievement of the whole process.”

I found this very interesting because he suggested that the court of public opinion on social media was due punishment and fear of this reprisal should keep the locals in line, metaphorically speaking.

A week or so later, the news out of Wall Street was the complete collapse of a large sponsor of the Mercedes AMG Petronas F1 team called FTX. You could have read about the strategic partnership here if Mercedes hadn’t scrubbed the webpage:

FTX and it’s one-time poster-boy for crypto currency, Sam Bankman-Fried (known as SBF), crashed in the most spectacular manner this week and according the Reuters, at least $1B in customer funds vanished from the platform. In fact, Reuters says that SBF transferred $10B of customer funds to his trading company, Alameda Research.

Things got more bizarre as people were tracking a flight to Argentina late last night in which many suggested it was SBF fleeing his location in the Bahamas. The plot thickened with each passing moment as chapter 11 was officially filed for FTX and the company recently announced they had been hacked and hundreds of millions of dollars had been moved from the platform in “Suspicious circumstances”.

According to the Wall Street Journal, Mercedes has officially suspended its deal with FTX and removed the logos from their cars. The deal was rumored to be multi-year in nature and worth $100M with FTX having access to Lewis Hamilton and, at the time, Valtteri Bottas to further the brands reach globally.

You may recall that Mercedes did a special NFT promotion in Miami with FTX. FTX offered free Solana-based NFT “ticket stub” collectibles for fans as well as auctioned off Ethereum NFT artwork associated with artist Mad Dog Jones. Two NFTs included a piece of the cars driven by Lewis Hamilton and George Russell in Miami.

If Toto Wolff is correct and that any impropriety a team might engage in will now be met by social media outrage and other teams piling on via their platforms—as well as media seeking clicks—causing consternation with the team’s sponsors, then it must be equally difficult when the situation works in reverse.

Mercedes isn’t the only Cryptocurrency backed team, many of the teams have crypto logos on their cars. Unfortunately, it would appear that these digital exchanges may be more volatile than some F1 teams would prefer.

Sponsors creating chaos is a challenging issue for teams—remember Haas F1 and it’s Russian sponsor or the Rich Energy debacle—and in this case, Mercedes AMG Petronas is associated with a sponsor that lost billions of their customers investments. You can’t overlook the impact of this and I doubt that this stops at FTX.

Other teams will surely be looking very seriously at their crypto sponsors as I am sure Mercedes do not enjoy the association with a company that now seems to be even seedier than anyone expected with allegations that SBF made off to Argentina with millions of investors dollars. Again, those are the rumors but they are rumors and pressure on social media and isn’t that what Toto Wolff said is the new metric by which teams will fall in line?

In the old days when the press were actually “journalists”, they would ask questions about how deeply Mercedes were invested, did they lose money, were they part of any marketing campaigns to their fanbase to solicit investment in FTX and were they aware of the issues and risks their fans faced?

Again, that would be in the old days. Today, this will be swept under the rug as the other teams quietly asses their crypto sponsors and seek to shield themselves from any potential fallout. In the case of Mercedes, they will remove the FTX logos from their cars and gear, remove the URL on their website about their FTX relationship and have an internal discussion about how they were impacted.

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charlie w

Mercedes may not be the most impacted victim of FTX’s collapse. FTX had its name on the Miami Arena and the Miami Heat team jerseys. Miami County signed a 19-year naming rights deal for $135million with FTX. Now gone. They also had a sponsorship deal with MLB by having their logo on the umpires’ uniforms. CNBC called the whole mess “crypto’s Bears & Sterns moment”. Next up,

Robert Orcutt

Good commentary. Thx!