TSM suspends $210 million naming rights deal after FTX woes, rocky year

However, the relationship between the two organizations under the megadeal hit several speed bumps before its dissolution, according to multiple current and former TSM employees.

On June 4, 2021, the naming rights deal between TSM and FTX debuted with a fancy video describing how the relationship started (TSM’s CEO, Andy Dinh, and FTX’s chief executive, Sam Bankman-Fried, have a shared passion for “League of Legends”) and an article in the New York Times. But the exchange unraveled rapidly this month following a liquidity crisis stemming from FTX’s alleged misuse of customer deposits.

On Nov. 11, Bankman-Fried resigned and the company filed for bankruptcy. FTX is now under investigation by the Justice Department, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

FTX did not respond to The Washington Post’s request for comment.

FAQ: Why the FTX collapse has plunged the crypto world into upheaval

There’s no evidence that FTX’s collapse or the dissolution of the naming rights deal between the two companies will have an immediate material impact on TSM’s books. Still, many prominent organizations in the esports industry have faced layoffs in 2022; TSM alone has seen three rounds of layoffs this year. The end of a record-setting deal in an industry awash in crypto money may have consequences down the line for the entire esports economy.

The terms of the naming rights deal involved several cryptocurrency-related expenditures on the part of TSM. In June of 2021, for example, the esports organization announced it would be buying $1 million worth of FTT, a crypto token belonging to FTX. At the time of the announcement, the price of the token hovered just under $35; today, it is priced at under $2.

“TSM has not held FTT since Q2 2022,” Sheldon, the TSM spokesperson, told The Post. “We do not hold any cryptocurrency on our balance sheet currently.”

As part of the naming rights deal, TSM also told employees they could buy a certain amount of the cryptocurrency Solana on FTX’s U.S. exchange and be reimbursed for it. Employees who spoke to The Post said TSM allotted how much an employee could spend and be reimbursed for based on seniority; current and former employees described seeing reimbursements ranging from $500 to $1,000. FTX and Bankman-Fried have long been proponents of Solana; the cryptocurrency community sometimes refers to SOL, the Solana token, as a “Sam coin,” referring to the FTX executive.

TSM declined to answer The Post’s questions about Solana, writing instead that the company did not distribute FTT to employees.

Report: At TSM and Blitz, staff describes toxic workplace and volatile CEO

Problems with the naming rights deal arose immediately: On the day of the deal’s announcement, Riot Games, the publisher behind the most prominent esport in which TSM participates — the one in which it started: “League of Legends” — said it would not allow the organization to display FTX’s name in-game. TSM continued to compete in “League” without the FTX brand in-game, but made moves to enter esports in which the developer and tournament organizers would allow them to use the name.

To that end, TSM picked up a “Defense of the Ancients” (Dota) team, Undying, in a bid to please FTX, according to multiple current and former employees who spoke on the condition of anonymity because they were not authorized to discuss their work at TSM with press.

“Prior to FTX, Andy and TSM leadership had no interest in ‘Dota,’ ” said one former employee. “[But] the FTX people love ‘Dota’ so much, and that’s why TSM got a ‘Dota’ team.”

“This is completely untrue,” wrote Sheldon in response to The Post’s questions. “TSM did not pick up a ‘Dota’ team for the benefit of the FTX partnership.”

The former employee noted that it was not uncommon for TSM to invest in games and esports that are important to large sponsors.

“It was pretty clear [FTX] were unhappy and they started clamping down, trying to make sure they were getting the value that they were looking for out of this insane investment,” said one former TSM employee. “And so TSM started having to figure out like, ‘Okay, what can we do more?’ ”

TSM disputed this characterization. “Stakeholders at FTX stated on multiple occasions that TSM was delivering everything it promised,” wrote Sheldon, the TSM spokesperson.

One industry expert noted that TSM’s entry into “Dota” was likely not a risky or particularly costly proposition for the organization.

“The Undying team was unsponsored, so there were no up front buyout costs,” wrote a former esports executive at a competing organization with knowledge of the market for “Dota” players in an email to The Post. The executive spoke on the condition of anonymity, citing a nondisclosure agreement. Also, “ ‘Dota’ salaries for a team in their bracket would be no more than $7-12k per month per person with the ability to get out of those contracts on two weeks notice most likely.”

TSM declined to comment on the executive’s characterization, but told The Post that the organization intended to remain in the “Dota” scene.

“We aim to win NA DPC again,” wrote Sheldon. “We plan to continue to support our players and team so they can best compete for championships.”

Sam Bankman-Fried charmed Washington. Then his crypto empire imploded.

Bankman-Fried, the former FTX chief executive, is a fan of multiplayer online battle arena games, or mobas, a genre that includes “League of Legends” and “Dota.” In a glowing profile of the crypto founder on the website of the venture capital firm Sequoia Capital, Ramnik Arora, FTX’s head of product, describes sitting through an important Zoom call between Bankman-Fried and investors at Sequoia. After a successful pitch by Bankman-Fried, Arora walked over to the executive’s desk to find that he had been playing “League” throughout the meeting.

“I sit ten feet from him, and I walked over, thinking, Oh, s---, that was really good,” said Arora, according to the profile. “And it turns out that that f----- was playing ‘League of Legends’ through the entire meeting.”

The profile now redirects to a mostly blank page on Sequoia’s website with a bolded notice, written in large font. It reads, in part: “A liquidity crunch has created solvency risk for FTX and its future is uncertain. Many have been affected by this unexpected turn of events.”

In spring of this year, FTX brought in the marketing agency Wasserman, with which the exchange had announced a partnership in February, to audit TSM’s adherence to the naming rights deal, which formally changed TSM’s name to TSM FTX.

“[FTX] had this agency go through and super painstakingly look at every single instance of TSM that didn’t say TSM FTX, including people’s email signatures,” said the former employee. “[Wasserman] did a really thorough sweep of all TSM players, accounts, everything to find any place that wasn’t listed as TSM FTX.”

In a statement, TSM said it welcomed Wasserman’s assistance managing the partnership between the two companies.

“In our conversations, Wasserman consistently agreed that TSM was delivering everything that it promised,” wrote Sheldon, the TSM spokesperson.

Wasserman representatives also joined a high level brainstorming meeting about new content deliverables TSM could create for FTX. Few of the ideas discussed in that meeting were taken up, according to one employee. Wasserman did not reply to The Post’s request for comment.

On Nov. 11, the Miami Heat said it was taking action to end its business relationships with FTX, and would rename its home venue, which was branded FTX Arena in 2021. The next day, the Brazilian esports organization Furia discontinued a $3.2 million sponsorship deal with FTX, citing fears that the organization’s endorsement of the exchange might bring harm to Furia’s fans.

Riot Games fines TSM, places CEO Andy Dinh on 2-year probation for bullying

FTX’s collapse is the latest blow for a company that has taken several hits over the past year. Earlier this year, more than a dozen current and former employees at TSM and its sister software firm, Blitz, told The Post that Dinh fostered a “culture of fear” at both companies. On July 13, Riot Games, the developer and publisher of “League” and “Valorant,” games in which TSM has a presence, fined Dinh $75,000 and placed him on a two-year probation following an investigation that concluded that “there was a pattern and practice of disparaging and bullying behavior exhibited by Andy Dinh toward TSM players and staff members.”

Former workers also told The Post that TSM and Blitz had misclassified them as contractors rather than employees, a practice that is illegal in California, where TSM is based. The state’s employment laws are among the strictest in the United States, according to legal experts.