MIAMI – FTX had slick ads, celebrity endorsements and naming rights at the county-owned arena that was home to the Miami Heat.
“They did presumably their due diligence and at the time they entered in the contract,” said former U.S. Attorney David Weinstein. “This was a business that portrayed itself as being legitimate.”
But federal prosecutors and regulators, who are pursuing a range of charges against founder Sam Bankman-Fried, argue the crypto trading platform was built on a house of cards.
“Do you think Miami-Dade County would be making this argument that we were duped along with everybody else?” Local 10 News’ Christina Vazquez asked Weinstein.
“Well quite frankly, they were duped along with everyone else,” he replied. “If you believe the allegations, then, yes, the county was duped just like everybody else.”
Related: ‘If it is too good to be true, it probably is’ FTX founder arrested, denied bail
U.S. authorities are now working to try and claw back money earned from what was described by one U.S. attorney as, “one of the biggest financial frauds in American history.”
Regarding the term “claw back,” Weinstein explained it’s “so they can reassess how much damage was done how much money people lost, and then try and distribute fairly, giving money back to everyone who was a victim.”
“Could the $20 million FTX already paid the county for first two years of the deal be subject to one of those claw backs?,” asked Vazquez.
“The county is in a different position, they are not an investor,” he replied, adding that the county has a “good faith defense.”
“They received the $20 million for valuable goods,” he said.
On the flip side, as to why the $20 million FTX already paid for the first two years of the naming rights deal is not subject to a claw back, prosecutors could argue, “you were given $20 million of tainted money, we are seeking to recover that $20 million as forfeiture, much as they are going after the properties,” said Weinstein, who added that the county could counter with another argument.
“As a recipient of money, that in good faith we believe came from a legitimate organization, you can’t have that money back,” he said.
Money the county mayor told Local 10 News on Tuesday is helping fund initiatives to curb youth gun violence.
Related: A closer look at Miami-Dade’s multimillion-dollar plan to address gun violence
“So you are the county attorney, what do you think you would advise county commissioners and administration to do?” Vazquez asked Weinstein.
“You don’t want to spend the money, turns out good faith defense is not accepted for whatever reason, and then you are scrambling to find that $20 million,” he said. “So my conservative advice would be take the $20 million, set it aside, don’t use it, let the litigation roll through, and then at the end of the litigation if you prevail than you can use the $20 million.”
Weinstein said the county attorney’s office could also reach a resolution with the federal government.
After FTX filed for bankruptcy, the county filed a motion with the bankruptcy court to sever its naming rights agreement. Until they hear back from the court, the arena will keep the FTX name.
The Miami Heat declined to comment.
Local 10 News reached out to the county attorney’s office for comment on what they are advising county administration and commissioners to do with the $20 million received from FTX to date, but has not received a response.
The Miami-Dade County Mayor’s Office told Local 10 News “Under the terms of the agreement, FTX already paid nearly $20 million for the first two years of the deal. We will be working swiftly to identify a new naming rights partner once the County is authorized by the court to proceed.”
The mayor’s office also confirmed a $5.5 million payment is due at the beginning of January.
A breakdown of the financial agreement and the payments can be found in the memo submitted to the Board of County Commissioners (see page 4): https://www.miamidade.gov/govaction/legistarfiles/MinMatters/Y2021/210781min.pdf
The naming rights agreement can be found on the same document presented to the Board of County Commissioners (see page 65): https://www.miamidade.gov/govaction/legistarfiles/MinMatters/Y2021/210781min.pdf