FTX Probing If Millions in Payments to Shaq, Naomi Osaka Can Be Reversed

FTX Group advisers have scrutinized whether they can claw back millions of dollars paid to Shaquille O’Neal, tennis star Naomi Osaka and other professional athletes and teams that promoted Sam Bankman-Fried’s crypto platform before its collapse.

(Bloomberg) — FTX Group advisers have scrutinized whether they can claw back millions of dollars paid to Shaquille O’Neal, tennis star Naomi Osaka and other professional athletes and teams that promoted Sam Bankman-Fried’s crypto platform before its collapse.

Financial advisers hired by FTX disclosed in court papers that they’ve analyzed if certain payments dished out to athletes before the company unraveled last November can be recovered in Chapter 11. Advisers have reviewed payments to O’Neal, Osaka and others to determine if the transfers are subject to rules that permit companies to reverse transactions that occurred just before a Chapter 11 filing, according to court documents.

While not a complete accounting of FTX’s spending on endorsements, the new disclosures likely offer the fullest glimpse to date into how Bankman-Fried’s empire elevated its profile using the fame of celebrity athletes, Major League Baseball, National Basketball Association teams and Formula 1.

Whether FTX advisers believe all of the payments can be recovered, or if any athletes or teams have already offered to return payments, couldn’t be learned. FTX’s disclosures describe many of the transfers to athletes, teams and leagues as prepayments related to advertising or sponsorship deals. 

FTX cautioned the financial disclosures may not be complete because the company lacked “detailed historical amortization information” and could be further amended in the future. New FTX Chief Executive Officer John J. Ray III said when the company filed Chapter 11, the company lacked trustworthy financial information and didn’t keep complete books and records.

It’s also possible that athletes, teams or other parties either withdrew or offset deposits before FTX filed bankruptcy, the company said. FTX in December said a number of parties that had been paid by the firm had attempted to return funds for the benefit of customers and other creditors. FTX said prepayments and deposits it ultimately recovers may differ from amounts the company reported.

The crypto platform disclosed roughly $4.9 million disbursed to MLB, which for a time required umpires to wear patches bearing FTX’s logo, and at least $12.2 million related to partnership agreements with Formula 1 racing team Mercedes-AMG Petronas. The platform disclosed $3.4 million in payments to the NBA’s Golden State Warriors and nearly $242,000 in payments to star player Stephen Curry’s business, SC30 Inc.

An FTX spokesman and a lawyer for Mercedes-Benz Grand Prix Ltd. declined to comment. Lawyers representing O’Neal, Osaka, Curry, the Golden State Warriors, and MLB didn’t respond to requests for comment. 

FTX said at least a portion of the Formula 1-related payments could potentially be reversed in Chapter 11 and FTX’s financial adviser, Alvarez & Marsal, has analyzed whether payments to the Golden State Warriors could also be undone, according to the firm’s billing records. Payments to the Warriors include $2 million transferred to the team about a month before FTX filed bankruptcy, according to court documents. Mercedes announced it would suspend its relationship with FTX shortly before the firm filed bankruptcy.

The disclosures come after FTX’s new management sued a venture capital firm that allegedly connected Bankman-Fried to NBA stars and other celebrities. Athletes and teams that promoted FTX including O’Neal, Osaka and the Warriors have denied wrongdoing in lawsuits blaming them for investor losses.

FTX affiliate West Realm Shires Services Inc. said it paid $2.5 million in August 2022 to a subsidiary of Authentic Brands Group affiliated with O’Neal. The same FTX affiliate said it paid Osaka $2 million on Nov. 9, 2022, two days before Bankman-Fried resigned as CEO and his company filed bankruptcy. The payments are among some $4.3 million in payments FTX attributes to O’Neal and his ABG business and roughly $3.2 million the company said it paid to Osaka related to FTX partnership and endorsement deals, according to court documents.

Other athletes named in FTX’s disclosures include Jacksonville Jaguars quarterback Trevor Lawrence, who FTX said received a $500,000 payment in September 2022. FTX also disclosed roughly $600,000 in payments to retired Boston Red Sox slugger David Ortiz and his charity that funds heart surgeries for children in the Dominican Republic and New England.

Also disclosed were roughly $1.2 million in payments to the NBA’s Washington Wizards and team owner Monumental Sports and Entertainment as well as about $484,000 paid to the Miami Heat. Those amounts include payments from an FTX affiliate to Monumental and the Heat for $969,000 and $400,333, respectively, about a month before the crypto firm filed Chapter 11. 

Lawyers for Lawrence and Ortiz didn’t return messages seeking comment. Alvarez & Marsal, the Miami Heat, Monumental and Authentic Brands Group also didn’t respond to messages seeking comment.

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