Scuderia Ferrari, the iconic racing division of luxury car manufacturer Ferrari, has decided to part ways with its cryptocurrency sponsors, Velas Blockchain and Snapdragon. The decision has resulted in a whopping $55 million loss for the Italian team ahead of the 2023 racing season.
Ferrari's partnership with Velas, which was set at $30 million a year, was meant to boost fan engagement through the use of nonfungible tokens (NFTs) and other shared initiatives. However, it seems that the team failed to meet its obligations under the deal, including clauses that allowed Velas to create NFT images. According to RacingNews365, Ferrari was noncompliant with these clauses, leading to the termination of the partnership.
This isn't the first time a Formula One racing team has had to end a partnership with a cryptocurrency sponsor. In November, Mercedes suffered a $15 million loss after suspending its partnership with FTX, the now-bankrupt crypto exchange. And earlier this year, Red Bull Racing's partnership with the Tezos Foundation also came to an end when the blockchain platform decided not to renew its agreement, citing "strategy misalignment".
Toto Wolff, the team principal and CEO of the Mercedes-AMG Petronas F1 Team, has warned that other teams could face similar issues in the future. However, the relationship between F1 and the cryptocurrency ecosystem extends beyond sponsorship deals. In October, Formula One filed trademarks for "F1" as it revealed plans to launch an online marketplace for cryptocurrency, meta tokens, digital collectibles, crypto-collectibles, and NFTs.
Digital Currency Group Under US Investigation
The US Department of Justice's Eastern District of New York (EDNY) and the US Securities and Exchange Commission (SEC) are reportedly examining the financial transactions between Digital Currency Group (DCG) and its subsidiary, Genesis. According to people familiar with the matter, prosecutors from the EDNY have requested interviews and documents from both DCG and Genesis. At the same time, the SEC is in the early stages of its own inquiry. The investigations related to financial interactions between DCG and Genesis. Surprisingly, neither Genesis nor DCG has not been accused of any wrongdoing. As such, a DCG spokesperson had this to say on the matter:
DCG has a strong culture of integrity and has always conducted its business lawfully. We have no knowledge of or reason to believe that there is any Eastern District of New York investigation into DCG.
Genesis has experienced significant losses due to loans given to the now-defunct hedge fund, Three Arrows Capital, and has filed a claim for $1.2 billion. DCG assumed this claim on behalf of Genesis. In addition, the FTX collapse forced Genesis to halt withdrawals from its lending unit, which had a knock-on effect on companies such as Gemini, which relied on Genesis for its Earn platform. Genesis has also undergone significant layoffs and is exploring options that could include filing for Chapter 11 bankruptcy. As of December, Genesis creditors had made claims totaling more than $1.8 billion.
Unfortunately, Genesis isn't DCG's only company battling with the market's current weaknesses. DCG's Grayscale subsidiary is also facing issues with its bitcoin trust product, with the discount on the share price relative to the bitcoin price exceeding 50% last month. From a near-broke lending group to a worsening state in GBTC, these investigations can make it even more difficult for DCG to navigate these challenges.