Crypto crash should make F1 teams reconsider who they sleep with: PlanetF1

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Formula 1 teams are dropping their crypto sponsors en masse, but should they have been there to begin with?

Financial embezzlement in Formula 1 is nothing new. The Rich Energy/Haas fiasco provides the clearest example of the parable that money is sometimes too good to be true, but in recent years the crypto world has sunk its claws into Formula 1.

Crypto and NFTs have long seemed like a house of cards waiting to fail on the outside, but for converts it was a chance to disrupt an age-old market and make big bucks. Or at least that was the idea.

Investors started trading and the number of cryptocurrencies exploded. Bitcoin and Ethereum both have a market value in the hundreds of billions, but the relative lack of regulation provides a wild west market where anyone can create their own currency if they choose.

As the platform grew and more and more money poured into it, the global and cultural reach of these currencies multiplied massively.

Anxious to impose themselves as queens on this new market, exchange companies have seized on popular culture to give credibility to their brand.

Soon sponsorship was everywhere, and what better way to guarantee millions of eyeballs gazing at your logo? Sport.

Sport has long been the ideal canvas for morally questionable companies to paint their mark in an effort to make it more legitimate. Eight current Premier League teams have gambling companies on the front of their shirts, countries such as Qatar and Saudi Arabia can be seen on the front of some of the biggest stars in the sporting world and the presence of crypto has become unavoidable.

Think back to any race in 2022 and you will have unknowingly seen dozens of logos for various crypto markets. Crypto.com sponsored all three Sprint races as well as the Miami Grand Prix.

As Max Verstappen struggled to open the DRS in Spain, it was the Bybit logo that viewers would have looked at. OKX had Daniel Ricciardo disguised as a magician in September. But the partnership that has received the most attention is Mercedes and FTX.

Over the past few months, FTX has become the focal point for all that is wrong with crypto. The now-bankrupt company was a cryptocurrency exchange that was only founded in May 2019, but in 2021, it posted $1.02 billion in revenue.

Its rapid expansion became visible in the real world, nowhere more in Formula 1 with the company sponsoring an event at the Miami Grand Prix and, most importantly, Mercedes.

Given their unprecedented success, Mercedes was arubaly the hottest property when it came to putting your logo on a car. So when the two parties announced a multi-year sponsorship deal in September 2021, it would have undoubtedly cost FTX a pretty penny.

The pair even released their own brand of NFTs, but the website that previously advertised is now offline.

Perhaps it is symbolic that the year Mercedes had the most trouble on the track was also the year FTX and its owner Sam Bankman-Fried would fall apart.

Without a degree in finance and a broader understanding of crypto that this author possesses, the collapse of FTX is centered on the fraudulent inflation of its value.

According to the New York Times, the company was based in the Bahamas and operated on risky business options that are not legal in the United States. They had their own native cryptocurrency known as FTT, but trouble started when Changpeng Zhao, the CEO of the world’s largest crypto exchange, Binance, sold his stake in FTX back to Bankman. -Fried.

He received a number of FTT tokens in exchange, but in November Zhao said he would sell the tokens after raising concerns about FTX’s financial stability.

FTT’s value plummeted as investors spooked and traders rushed to exit, the company was left with an $8 billion shortfall.

It looked like FTX was saved when Binance suggested giving them a loan only to decide after due diligence that FTX’s assets had no value.

FTX filed for bankruptcy in November 2022 and Bankman-Fried was later arrested for deceiving investors and looting billions of dollars.

In the same month, Mercedes removed the FTX logo which had taken pride of place on the front fender nose and rear fender endplate.

Although Mercedes was used as the prime example, they are by no means the only ones who have gone to bed with some kind of crypto platform and all results are largely the same.

Nine of the current 10 teams have some sort of crypto sponsor, with Williams being the only team exempt from such an agreement. A Sports Illustrated report in November showed the steep fall in the value of all F1 team sponsors.

Ferraris Vela went from $0.001 to $0.000081. Alfa Romeos FLOKI went from $0.001 to $0.000081. McLarens Tezos from $45 to $12. Binance Alpines from $5,000 to $2,782 and the list goes on.

It’s easy to see that these are just numbers on a screen, but if you consider that a large number of people have invested huge sums of money, it becomes more real. Overnight, homes, savings and investments were lost.

While the Formula 1 teams can hardly be blamed for the collapse of an external industry, the question can be asked whether they should have done more due diligence?

By agreeing to have a logo on their car, teams give their stamp of approval and, as with all sports teams, each manufacturer has an incredibly dedicated fanbase.

The reality is that if a hardcore Mercedes fan saw FTX on the side of their team car, they would naturally lean towards that market more than any other.

Therefore, every team and even the sport itself has a responsibility to ensure that they are not promoting companies that actively harm their fans.

In 2006, smoking sponsors were banned by the World Health Organization, but since crypto trading and gambling don’t have such a clear relationship to a person’s declining physical health, it an independent body is unlikely to intervene anytime soon.

Mercedes and other teams may suffer financial loss from the collapse of the industry, but they are not the real victims. These are ordinary people putting their life savings into something they thought was respected and safe, regardless of the warnings in the smallest print.

Livelihoods lost, homes lost, economies lost. As is the case with any financial meltdown, it is not those who caused it who have suffered the most, but rather those who believed in it.

Formula 1 teams have a responsibility to be better. They know full well how much influence their name can have on a company’s credibility and it’s time they ignored the many dollar signs flooding into their account and started thinking about the fans who trust them.

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