and FTX doled out millions in charitable donations. Now, new management is asking for it back.
Some of the money, however, has already been spent, and the gifts flowed through myriad sources and agreements that are proving difficult to tally.
Mr. Bankman-Fried, FTX and its affiliates used stolen customer money to pour billions of dollars into risky wagers that imploded, according to federal prosecutors and regulators. The company collapsed into bankruptcy in November.
Its undoing continues to ripple through the crypto world and beyond it, to academia, nonprofits and politics. FTX’s new management, led by CEO
John. J. Ray,
says it has been a challenge to determine the company’s assets, liabilities and even how many bank accounts it held. Customers whose money is locked up on the crypto exchange are wondering if they will ever get it back. Mr. Ray has asked for their patience but warned it will be a difficult road.
Federal prosecutors have said Mr. Bankman-Fried used customer deposits to fund his trading firm and make political donations, and regulators have said he used customer money for personal expenses as well, like buying lavish real estate.
Mr. Bankman-Fried has pleaded not guilty to prosecutors’ charges. His spokesman said that charitable donations were all from trading profits, and not from customer deposits.
FTX’s new management is also trying to claw back donations that Mr. Bankman-Fried and other executives made to politicians and political groups.
The company said in a press release that its new management has been approached by “a number of recipients of contributions or other payments” from FTX that want to return the money. The company has urged others to do the same. For those that don’t, FTX said, it will “commence actions before the bankruptcy court” to require that the money be returned, with interest.
Future Fund, FTX’s primary charitable arm, pledged more than $160 million to more than 110 nonprofits as of September, according to its now-defunct website. Grantees included biotech startups and university researchers working on Covid-19 vaccines and pandemic preparedness studies; programs that provide online resources and mentoring to STEM students in underdeveloped parts of India and China; and a nonprofit building renewable solar panels in communities ranging from Appalachia to the Brazilian Amazon.
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Millions of dollars were doled out just in 2022, per Future Fund’s former site, even as crypto prices were crashing. According to the old website: Future Fund pledged $3.6 million to AVECRIS to build the “next generation genetic vaccine platform,” and $5 million to the Atlas Fellowship to support scholarships and a San Francisco-based summer program for high-school students.
One of the largest pledges, according to the old website, was $10 million to biotech startup HelixNano to run “preclinical and Phase 1 trials of a pan-variant Covid-19 vaccine.”
None of the organizations returned requests for comment.
Mr. Bankman-Fried often said philanthropy was his primary motivation for amassing a fortune.
In a recent interview with The Wall Street Journal, Mr. Bankman-Fried said the majority of his charitable giving was sincere. But he also said that some was to curry favor with the public.
“When I pledged to give away $2,000 to some brand name charity as part of some promotion related to FTX’s business, that was as much PR as anything else,” Mr. Bankman-Fried told the Journal.
FTX company Blockfolio agreed to make “annual contributions to charities designated by” supermodel
who filmed a commercial with then-husband
The lawyers working through FTX’s bankruptcy have asked to end the partnership along with a number of other sponsorships. A representative for Ms. Bündchen didn’t comment.
The Alignment Research Center, a nonprofit focused on machine learning, announced that it will return its $1.25 million grant from the FTX Foundation, saying the money “morally (if not legally) belongs to FTX customers or creditors.” ProPublica, a nonprofit investigative media outlet, said it would return the $1.6 million it received from Building A Stronger Future, Mr. Bankman-Fried’s family foundation.
Many charities have already spent at least a portion of the money received from FTX. A spokeswoman for the Good Food Institute, a nonprofit think tank supporting plant- and cell-based meat alternatives, said it has already spent all the funds it received from two FTX grants. The spokeswoman said GFI’s legal counsel advised that the odds of having to return grant funds were low, based on their grant agreement.
Stanford Medicine received approximately $4.5 million and was promised another $1 million, a spokeswoman said. She said she couldn’t disclose the amount already spent, but said that the school is holding any remaining funds while it waits for legal clarity.
A major challenge is figuring out when FTX became insolvent—or whether it was ever solvent in the first place. If a donation was made while FTX was technically unable to pay its creditors, those funds may need to be returned due to bankruptcy laws.
“This case is all about solvency,” said
bankruptcy partner at Kleinberg, Kaplan, Wolff & Cohen PC.
Further complicating the clawback process: FTX Foundation may not be considered the same thing as FTX. Recipients who received funds from FTX Foundation rather than FTX itself may have additional protections, he added.
If the court determines FTX was a Ponzi scheme however, the FTX managers could argue that the donations will have to be returned because they were themselves intended to defraud customers and investors.
Mr. Kleiner said he thinks the most likely case is that management tries to settle with nonprofits that received funding.
“People lost money in FTX,” he said. “If you’re a creditor, it’s unfair that they took your deposits and gave it to someone else, even if it’s a charity.”
Write to Eric Wallerstein at email@example.com
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