The demise of cryptocurrency exchange FTX has hit Miami-Dade County and the Miami Heat basketball team right in the arena.
In 2021, Miami-Dade County Commissioners approved a 19-year, $135 million naming rights deal with FTX to change the name of American Airlines Arena to FTX Arena.
Then-county commissioners said the deal would allow it to invest $90 million in programs to help the local economy. FTX has also pledged to provide $5 million to local communities to address poverty and gun violence.
FTX Trading Ltd. announced on Friday that it, along with West Realm Shires Services Inc., Alameda Research Ltd. and approximately 130 affiliates, had commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware.
The company said John J. Ray III was named chief executive of FTX Group following the resignation of Sam Bankman-Fried.
“The immediate Chapter 11 relief is appropriate to give FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” Ray said in a press release.
Cryptocurrencies are decentralized, digital lines of computer code that are digitally signed each time they are transferred from one owner to another; the chain of custody is kept in ledgers known as blockchain.
FTX was a cryptocurrency exchange, allowing customers to exchange digital currencies for other cryptocurrencies or regular money.
Its headquarters were in the Bahamas, which allowed it to offer trading options that are not legal in the United States, according to a New York Times Explainer.
Miami-Dade County Mayor Daniella Levine Cava said the search for a new name for the arena — and associated naming rights revenue — will begin soon.
“Reports of FTX and its affiliates are extremely disappointing. Miami-Dade County and the Miami Heat are taking immediate action to end our business relationship with FTX, and we will work together to find a new naming rights partner for the arena,” Cava and the Heat said in a joint statement released Friday night.
Published reports said FTX still owed the county $5.5 million for the naming rights payment that fell due in January, after making an initial payment of $14 million last year.
That’s a pittance compared to the billions of dollars in debt tangled up in FTX’s bankruptcy.
“We are proud of the impact our Peace and Prosperity Plan – sponsored by County Commissioner Keon Hardemon and funded through the original agreement – is already having in preventing violence and creating opportunity. for the youth of Miami-Dade, and we look forward to identifying a new partner to continue funding these important programs in the years to come,” the County/Heat joint statement read.
Last March, the Government Finance Officers Association issued a warning who urged government finance officials not to use or invest in cryptocurrencies for government operations.
The group warned that cryptocurrencies have no substantial value, are incredibly volatile in nature and are potentially illiquid.
Miami-Dade County and City of Miami politicians, including the city’s mayor, Francis Suarez, have been cryptocurrency enthusiasts.
Miami-Dade County and the City of Miami have made tentative forays into cryptocurrencies like Bitcoin, which they believe can enable local governments to work faster and more efficiently while turning their municipalities into hubs of technological innovation.
Last year the county council voted on a bill to create a task force to study the possibilities of using cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, Ripple, Dogecoin, Cardano and Polkadot, for county business.
“Allowing cryptocurrencies as a mode of payment for county taxes, fees and services is an application of blockchain technology that has the potential to improve convenience and reduce costs,” said the resolution initiating the study.
In Miami, the City Commission is studying several proposals for cryptocurrency expansion and examining the opportunities and risks that mining and the use of cybercurrencies present to local governments. The city commission also passed a resolution encouraging the Florida legislature to let Miami invest some of its cash in bitcoin.
FTX stepped in to buy the naming rights to the 20-year-old Miami NBA site after the arena’s first namesake, American Airlines, allowed its development expire.
Construction of the arena was funded by the NBA franchise owner, in exchange for land from the county. In 2018, the county was paying $6.4 million a year for “arena management” to private team owners, which can be mitigated by selling naming rights, according to the official statement for the taxable sale of tax revenue refund bonds from county professional sports franchise facilities that year.
According to Bloomberg News, the Miami-Dade arena naming was just one of FTX’s sports offerings. Major League Baseball umpires wear FTX patches as part of a sponsorship deal, and FTX also has a partnership with the Mercedes-AMG Petronas Formula One racing team.
ESPN reported that FTX has also reached marketing deals with the Golden State Warriors and Washington Wizards as well as high profile athletes such as Tom Brady of the National Football League’s Tampa Bay Buccaneers and the tennis star. Naomi Osaka.
Another big arena, the Staples Center in Los Angeles, was renamed Crypto.com Arena in December 2021 when this Singapore-based cryptocurrency exchange bought the home of the Los Angeles Lakers, Los Angeles Kings, and Los Angeles Clippers. .
There are always good points and bad points in any new product, John Hallacy, founder of John Hallacy Consulting LLC told The Bond Buyer.
“When we discussed crypto and its potential applications Last year we fully understand that crypto business resides in an unregulated market and has therefore always been subject to more volatility,” Hallacy said. “The greenback is difficult to replace as a store of value. Just ask those who have agreed to pay in crypto,” he said.
Clearly, FTX’s bankruptcy is a setback for digital money, he said.
“But new products always have bumps,” Hallacy said. “I’m sure interested parties will try to improve the product and its features over time. Full adoption is not a given, but something to be earned and trusted.”
Miami-Dade County is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings. All three agencies have stable credit outlooks.
Since 2011, the county has sold more than $20 billion in debt, with most issuance occurring in 2020 when it sold $2.97 billion in debt. In August, the county sold nearly $480 million in Series 2022 Transit System Sales Surtax Bonds to fund some of its transit infrastructure needs.
The value of all cryptocurrencies in August was estimated to be around $1.1 trillion, up from nearly $3 trillion in 2021, according to S&P Global Ratings. According to the Federal Reserve, the M1 money supply in the United States, which includes money in circulation and deposits in banks, was $12.8 trillion in 2020.
The cryptocurrency market has been lightly regulated by the Securities and Exchange Commission, but that could change.
U.S. Representative Brad Sherman, D-California, who chairs the Investor Protection and Capital Markets Subcommittee, said FTX’s collapse “was a dramatic demonstration of both the risks inherent in digital assets and critical weaknesses in the industry that grew up around them.”
He said he would study options for federal legislation.
“For years, I have advocated for Congress and federal regulators to take an aggressive approach to the many threats posed to our society by cryptocurrencies,” he said in a November 13 statement. “I think it’s more important than ever that the SEC take decisive action to end the regulatory gray area in which the crypto industry has operated.”
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