Nine days after FTX's troubles began, the industry's second-largest cryptocurrency exchange worth an estimated $32 billion has officially collapsed and filed for bankruptcy in the US on Friday morning.
This comes after initial liquidation worries with FTX's sister company led to an effective run on the FTT Token. This was compounded by the start of DOJ and SEC investigations into possible securities fraud, the freezing of FTX assets by Bahaman officials, and reports by the Wall Street Journal that FTX had lent over half of its customer's funds worth $10 billion to its sister company to fund very risky investments. The reports also indicated that $1 billion of client funds are missing from the companies accounts.
Read more: Here's how FTX got into this mess
This all led to the bankruptcy announcement by FTX and the resignation of its CEO, who himself has lost an estimated $16 billion personal fortune, on Friday morning.
FTX Trading Ltf. (d.b.a. FTX.com), announced today that it, West Realm Shires Services Inc. (d.b.a. FTX US), Alameda Research Ltd. and approximately 130 additional affiliated companies (together, the "FTX Group"), have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.
The collapse will have far-reaching effects both in and outside of the crypto world due to both the money tied up to the crypto exchange and the massive partnerships the company had.
As well as with the likes of Tom Brady, the Golden State Warriors, and Major League Baseball in traditional sports, FTX had also partnered with TSM, FURIA, League of Legends' LCS tournament, and Nerd Street Gamers, all of which will be feeling the heat following Friday's announcement.
While FTX could still be saved with a multi-billion dollar buyout, TSM's $210 million naming rights partnership is almost certainly dead. The organization had this to say about the FTX collapse in a statement released on Twitter:
Along with the rest of the world, TSM has been closely following the situation surrounding FTX. We have no insight into the matter other than what has been reported publicly. We are currently consulting legal counsel to determine the best next steps to protect our team, staff, fans and players. To be clear, TSM is built on a solid foundation. We are stable and profitable, and we continue to forecast profitability for this year, next year, and beyond. We look forward to a great year in 2023.
Legally, TSM has a number of options concerning how to respond to the FTX bankruptcy.
When FTX misses its next payment to TSM as part of its 10-year naming rights deal, TSM can try to recover funds owed via litigation. This means TSM does have a possible incentive to continue using the "FTX" in its name until it has legally exhausted all options to recover the money owed by FTX.
With tens of billions of dollars involved in this bankruptcy, TSM's claim will likely be a fairly low priority, and it's unlikely it will be able to recover too much more from its FTX partnership. It is, therefore, more likely that TSM simply cuts its losses and either ditch the FTX tag or find an alternative naming rights partner.
That was exactly what a statement from the Miami-Dade County Major and Miami Heat NBA team after the bankruptcy announcement, surrounding their own naming rights partnership for the FTX Arena, said; "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".
Similarly, the Mercedes AMG Petronas F1 Team suspended their own partnership with FTX just hours before the start of the São Paulo Grand Prix weekend, stating that "the company will no longer appear on our race car and other branded assets from this weekend". The FTX logo was previously on both the Mercedes car and the race suits of both seven-time World Champion Sir Lewis Hamilton and his teammate George Russell.
In contrast at the time of writing, TSM is the only one of FTX's esports sponsors to have made a statement around the collapse, while none of their esports sponsors have made public moves to distance themselves from the brand.
Sir Lewis Hamilton. (Photo: Mercedes F1)
No matter how long TSM sticks with the FTX brand, they will not be getting the full $210 million that initially broke records when it was announced last June.
While TSM's statement reassures fans that they are profitable regardless of the FTX money, this collapse may still be an issue for TSM, as they had announced plans to spend the additional money to expand outside of North America and into Asia, Europe, and South America:
With this strategic partnership, TSM FTX will embark on a new set of industry-leading initiatives and specifically seeks to invest these resources into esports and gaming over the next five years. The partnership's strategy includes a focus on massive expansion into new platforms such as mobile, accelerating existing global reach with the opening of offices in Asia, Europe, South America and more and building on existing performance infrastructure, and increased investment in talent development.
While TSM most recently announced plans to pick up a European Counter-Strike team in 2023, a game they last left in 2017, a significant amount of this outward reach has been centered on Japan.
As well as launching a Japan-language Twitter account and signing multiple Japanese Apex Legends streamers, there was also an initial announcement of Japanese-language TSM R6 coverage that never materialized.
"The thesis is that esports is the most global sport in the world. We have TSM fans all over the world and we really want to reach them. We’ve taken initiative to expand globally over the past year, setting up an office in Shanghai and picking up teams in Brazil and India" stated Walter Wang, TSM's Vice President, in an interview with Dexerto in October 2021.
Now, with one of the largest investments in esports history halted 17 months into the 10-year deal, it is likely that all these plans have been slowed considerably.
As for Rainbow Six, in particular, it is likely that this will further incentivize TSM to push for the North American League to return to an online setting, as is heavily rumored to be the case for 2023. This would considerably lower the costs of operating a Rainbow Six team in North America.
FTX's collapse will likely also impact FURIA's global expansion plans also, as the team had signed a one-year $3.2 million sponsorship deal with FTX in April 2022 and had since announced plans to open up a studio in Miami, Florida, and joined the Los Angeles-based VALORANT Americas League.
It is unknown whether any of the FTX funds are still owed to FURIA or how reliant these plans are to the sponsorship money, however, as the two plans were announced separately.