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Happy Friday, Fintech Nerds!

Next week, the gauntlet begins. Washington D.C., New York, Austin. Many events. Many panels and presentations. Many meetings over coffees and beers.

Can’t wait!

And today?

Well, I have been preparing my whole life to write today’s newsletter.

How’s that for a teaser?

- Alex

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Aspiring to Cheat

What happened?

Inject this story directly into my veins:

Kawhi Leonard allegedly received a lucrative, no-work contract from a now-bankrupt environmental company with direct ties to his team, the LA Clippers, and franchise owner Steve Ballmer so that he could be paid more money without it counting against the NBA’s salary rules, according to accusations made by former employees of the firm to a podcast.

In the latest episode of the “Pablo Torre Finds Out” podcast, which was released Wednesday morning, seven anonymous former employees for San Francisco-based Aspiration, an environmental start-up company partly funded by a $50 million investment from Clippers owner Steve Ballmer, said the four-year, $28 million endorsement deal Leonard received in 2022 was for a “no-show job” intended to “circumvent the (NBA) salary cap.”

So what?

I’ve been covering Aspiration, a sustainability-focused neobank, with a great deal of skepticism since 2021, when I co-wrote an article about the company with Ryan Martin. In the piece, we picked apart a lot of the data shared in its SPAC investor presentation.

I have also written quite a few times about the National Basketball Association here at Fintech Takes.

In fact, I would be willing to venture a guess that no reporter or analyst has anywhere near my level of knowledge and experience covering the overlap (real and invented) between the financial services industry and the NBA.

And while I wish that I had compared Kawhi Leonard to Aspiration in this fintech company-NBA player essay (I compared him to a different scammy fintech company instead), I still feel that I am, by far, the most qualified person in the world to analyze this story.

So, here’s the timeline:

In 2019, the LA Clippers traded future NBA MVP Shai Gilgeous-Alexander and five first-round picks to the Oklahoma City Thunder for Paul George. This trade convinced Kawhi Leonard to sign with the Clippers as an unrestricted free agent. These two moves vaulted the Clippers immediately into championship contention.
In 2020, Aspiration raised a $135 million Series C. That was followed by an additional $315 million in 2021, $50 million of which was provided by Steve Ballmer (the owner of the Clippers) at a premium. Hold onto that last detail.
Later in 2021, the Clippers announced a sponsorship deal with Aspiration valued at more than $300 million and set to run through 2043.
In 2022, Kawhi Leonard signed a sponsorship deal directly with Aspiration. The deal was worth $28 million in cash (paid over four years) and an additional $20 million in equity, which was paid out of Aspiration co-founder Joseph Sanberg’s personal equity. Bizarrely, the contract included a clause that allowed Kawhi to choose to do literally nothing to support or promote Aspiration and still be paid the entire $48 million. He reportedly opted to do exactly that. The contract also stipulated that Kawhi would not continue to be paid (for doing no work!) if he left the Clippers.
Also in 2022, Aspiration co-founder and CEO, Andrei Cherny, stepped out of the CEO role, positioning himself to run for Congress in Arizona and (I presume) getting some distance away from the company and his co-founder, Joseph Sanberg.
In 2023, Aspiration laid off a large portion of its employees and pivoted completely away from financial services, choosing, instead, to focus on sustainability services (AKA planting trees for companies that want to reduce their carbon footprint).
Also in 2023, the Clippers terminated their sponsorship deal with Aspiration, presumably for the same reason that the company laid off most of its employees: it had run out of money.
In 2024 and 2025, the wheels fully come off for Aspiration. The Department of Justice and the Commodity Futures Trading Commission opened investigations into Aspiration’s environmental claims (i.e., they weren’t actually planting the trees they said they were planting). Aspiration’s parent company filed for bankruptcy. And Joseph Sanberg and another member of Aspiration’s board of directors pleaded guilty in a federal fraud case.
And finally, for whatever it’s worth, in the 2024-2025 NBA season, the Clippers won 50 games, earned the fifth seed in the Western Conference playoffs, and were eliminated in the first round by the Denver Nuggets. Kawhi played all seven games in that series (unusual for him), but was a team-worst -33 in +/- in the decisive Game 7.

The Kawhi Leonard/Aspiration side deal was first reported by Pablo Torre this week (with some additional reporting from the Boston Sport Journal), and it has, as you might imagine, turned the NBA world upside down.

It also provides a coda, of sorts, on the most volatile and speculative period in modern fintech history.

Here are a few thoughts:

The key question for the NBA is obviously if Steve Ballmer, who is, by far, the richest NBA team owner, knew about, coordinated, or directed the deal between Kawhi and Aspiration in order to circumvent the league’s salary cap. The Clippers put out a statement claiming, emphatically, that he did not. I don’t know if the NBA will discover irrefutable evidence proving that he did know about it, but the circumstantial evidence we have seen so far isn’t in Ballmer’s favor. Is it a coincidence that Ballmer’s $50 million investment in Aspiration is almost exactly the same amount of money that Aspiration agreed to pay Kawhi in cash and equity? Why did the contract allow Kawhi to get paid while literally doing nothing to help Aspiration?
I will say that Kawhi’s deal with Aspiration is not, by itself, unprecedented. Other NBA players have personal endorsement deals with the companies that sponsor their teams. Also, Kawhi’s deal being contingent on him staying with the Clippers is not totally unreasonable. Imagine if he had been traded to the Dallas Mavericks, and Aspiration was on the hook to pay him to not promote their brand while playing in a jersey featuring Chime’s logo?
The argument in defense of Steve Ballmer, the Clippers, and Kawhi Leonard basically boils down to Aspiration being stupid, which is not an unreasonable argument. Why did Aspiration agree to pay Kawhi $48 million in exchange for no work? It’s not some fraudulent scheme cooked up by Aspiration and Ballmer. Aspiration is just stupid! To quote Jared Vennett, "Tell me the difference between stupid and illegal and I'll have my wife's brother arrested."
If the NBA ends up penalizing the Clippers for this, which seems distinctly possible even if a smoking gun doesn’t emerge, it will somehow make the trade for Paul George and Kawhi Leonard in 2019 even more of a disaster than it already is. The Thunder just won the NBA title (Editor’s Note — I despise the way the Thunder play basketball) by building around the stuff that the Clippers traded them to get Paul George. Paul George is now gone, Kawhi is one of the least reliable players in the league, and the Clippers have won a total of three playoff series in the last six years. And now they may lose even more of their future draft picks as punishment. YIKES.
There is a strategy that is common in the tech startup scene — I refer to it as the Bilt Maneuver — to entangle partners, customers, and suppliers in your company by selling those companies equity in your company. This entanglement makes it easier to convince those other parties to do stuff for your company that they otherwise might not do. However, they also create the potential for gigantic conflicts of interest, which is what we are seeing manifest in this story with the financial relationship between Ballmer and Aspiration (which, again, Ballmer paid a premium to establish).
I’m going to ask a purely hypothetical question: Would it shock you if the Miami Heat, Jimmy Butler, and FTX (the former sponsor of the Heat’s arena) entered into a similar arrangement? No, right? Pat Riley is a ruthlessly competitive dude. Jimmy Butler habitually complains about being underpaid. And Sam Bankman-Fried is Sam Bankman-Fried.
One of the consequences of the private market becoming so big and more companies opting to stay private for longer (or, seemingly, forever?) is that it leads to poor due diligence. Private companies don’t have to share data with anyone, and a lack of reliable data makes it easy to get tricked by hype. Were the Dallas Mavericks and the LA Rams significantly better at due diligence than the Clippers and Heat? Or did they just get luckier in picking Chime and SoFi as sponsors, respectively?
Last thought. And, again, this is a hypothetical: What if the fintech industry had a cap on the amount of money private companies could raise from VCs? Which fintech companies would thrive while working with limited capital? Which companies would be disasters if they couldn’t continually raise more and more money from VCs? Which companies would try to find creative ways to cheat and get around the cap? I legitimately want to hear your thoughts on these questions. This might be the focus of a future article 🙂

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MORE QUESTIONS TO PONDER TOGETHER

Big news for the endlessly curious (yes, you): I’m collecting your fintech questions on a rolling basis.

What’s keeping you up at night? What great mysteries in financial services beg to be unraveled? Think of it this way, if a stranger is a friend you just haven't met yet, your question is a Fintech Takes conversation waiting to happen.

One that could headline a Friday newsletter or be answered in an upcoming Fintech Office Hours event.

Drop your question here, whenever inspiration strikes!

🏀 FINTECH TAKES THE COURT 🏀

Yep, it’s happening again!

I am DELIGHTED to officially announce the third annual “Fintech Takes The Court” 3x3 basketball tournament, which will take place in the morning on Sunday, October 26th, in Las Vegas.

This year’s tournament is being sponsored by SOLO, and it’s going to be the best one yet. If you’ll be attending Money20/20 (or just in Las Vegas that week) and are interested in getting off the Strip for a few hours and getting some exercise (or just coming to cheer the teams on!), fill out this form. Space is limited, so don’t wait 🙂