The Dark Side of F1 & Motorsports Sponsorships

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One of the most popular sports on the globe, Formula 1 attracts thousands of fans to witness the ultimate battle between the best of the best.

With the advent of the Netflix’s extremely popular Drive to Survive series, continues to grow in popularity as more fans and businesses show interest.

The Monaco Grand Prix track attracts millions of viewers and spectators every year. The events are filled with so much pomp, festivity, and a prominent display of wealth, that it makes many of us wonder just how lucrative the Formula 1 World Championships are.

The pressure is always on F1 drivers

F1 drivers prepare months in advance for a season, honing their skills over years in junior categories with the hope of emerging as the best. The mental pressure before and during the race is exhausting, and very few drivers have been known to seek help.

Travelling from one country to another has been known to cause burnout and fatigue for the whole team. Accidents on the track are common and grisly. That’s not to mention the physical effects the drivers face while driving.

Despite all the challenges and hardships, many of these drivers wouldn’t give up the opportunity for anything. The sport offers competitive salaries and brand partnerships that earn its driver’s big sums of money.

F1 Sponsorship and Advertising

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Due to the large number of spectators attracted to these races, many companies opt to advertise through F1. These companies often have their logos or names printed on the cars.

While the cars often move too fast for the logos to be seen, companies continue to advertise. This advertising often includes alcoholic beverages, online casinos or betting companies, couriers, bands, and even popular brands like Coca-Cola.

F1 sponsors contribute as little as $500,000 to over a million dollars annually. The rate of sponsorship is based on the team’s pedigree. For example, a more successful team can be paid millions per year in sponsorships.

Advertising through F1 has proven to be beneficial to companies in many ways. They get to associate themselves with well-established brands while reaching millions from all over the world.

When sponsorships turn murky

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Sponsorships are a lucrative avenue for any team. However, the teams may also receive lousy publicity from their partner companies.

Many teams do not carry out background checks or ascertain the credibility of the companies they partner with. This often leads to MLMs and fraudulent companies gaining credibility through the partner team.

Although the International Automobile Federation sets a few rules and limitations, there are many loopholes that can be exploited.

Haas, an American Formula 1 team, recently cut ties with its Russian sponsors following Russia’s invasion of Ukraine.

One of the team’s sponsors, Uralkali, is a Russian oil company. Although the sponsorship earns Haas a decent sum, the partnership would have led to negative publicity and a sullied reputation for the team.

In the same vein, drivers ought to be held to higher professional standards. Nikita Mazepin, a rookie F1 driver and son of Dmitri, a Russian oligarch, was recently sanctioned by the USA. He was also ousted from his team because of his connections to Putin.

A slew of questionable decisions

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Other than Russian oligarchs, F1 teams also get sponsorship deals from companies with even worse sustainability records in the environment area. Other companies that have shown interest in F1 sponsorships are tobacco and cigarette companies.

More illegal activities have been tied to motorsports sponsorships beyond F1. These include Ponzi schemes, gambling, embezzlement, smuggling drugs, and racketeering.

Drivers like schemester Daniel Uckermann (pictured above) and Scott Tucker have been involved in multiple embezzlement schemes meant to defraud their fans, creditors, and other sponsors.

Sponsorships have been used as a front for money laundering and tax evasion. Money laundering is the process by which criminals and illegal institutions convert money earned from illegal activities into “legal” cash.

Often, criminals such as drug lords end up with a lot of money that needs to be concealed, and avenues like sponsorships provide the perfect opportunity to do so.

F1 teams are seen as the perfect avenue to launder money. The extravagance of F1 teams is barely questioned, providing a perfect cover for criminal enterprises to use. Massive and frequent money transfers can be made to F1 teams under the guise of sponsorships.

Money can and has been moved from tax havens for the same reason. Other payments, such as inflated agent fees and betting networks, can all help criminals make their illicit gains seem legal.

More regulation is needed

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A team with such sponsors would find it hard to report out of fear of the information being made public and losing more sponsors as a consequence. Subsequently, little can be done to bring such criminals to justice.

Fraudulent companies have been known to avoid taxes by using sports sponsorships as a disguise. Often, these companies inflate the amount given in sponsorships to get tax breaks. While such behavior is frowned upon, many conglomerates have gotten away with it.

There are many ways to exploit Formula 1 teams, which poses a problem for the future of the sport. Regulatory boards need to find a way to enforce stricter rules rather than limit the scrutiny to just the drivers. All members of these teams need to be held accountable if the sport is to be cleaned.