Bankman-Fried’s Grand Charitable Announcements Don’t Turn Into Grants

The spectacular flameout of FTX and its Founder and CEO Sam Bankman-Fried has ripple effects that extend well beyond the confines of crypto trading and will likely impact philanthropy — and specifically, the “effective altruism” thesis that Bankman-Fried highlighted as the FTX corporate ethos.

FTX’s driving force, Bankman-Fried or SBF for short, had long promised that the bulk of his fortune would wind up going to charity. Effective altruism, the investing philosophy that would have benefited from the presumed billions to be donated, seeks to do the “most” good on the widest scale — addressing, for example, climate change or artificial intelligence (AI) in the service of society’s long-term benefit.

Last year’s  blog postings from the FTX foundation stated that “as a start, we’re pledging to allocate 1% of FTX’s revenue from fees to the FTX Foundation.” Elsewhere the fund noted that it had been “funded principally by Sam Bankman-Fried and other senior principals at FTX. Earlier this year the FTX Foundation’s Future Fund had said it aimed, in principle, to make as much as $1 billion in grants and investments.”

Among the casualties of last week’s implosion of FTX’s trading platform has been the “altruism fund” that had been created by the company. The FTX Foundation, a philanthropic collective, which had been set up to bestow grants to various efforts, has effectively shuttered, and so has its Future Fund.

Mass Flameout

The fund’s team resigned en masse and wrote in an open letter that “we are now unable to perform our work or process grants, and we have fundamental questions about the legitimacy and integrity of the business operations that were funding the FTX Foundation and the Future Fund.”  The team also noted that “We are devastated to say that it looks likely that there are many committed grants that the Future Fund will be unable to honor.”

As has been the case with FTX, the trading platform, there have been reports that even the charitable efforts had little oversight. The New York Times noted Monday (Nov. 14) that the FTX Foundation had been staffed with the founder’s “close coterie of collaborators” including officers from Alameda Research and FTX — not exactly an arms’ length setup.

The full scope isn’t known yet as to which grants have seemingly evaporated (and what causes may be most directly impacted). A reported $190 million had been donated across a variety of causes, so at least at the moment it looks like positioning outstripped intent and actual contributions.

In one example widely reported, ProPublica, an investigative journalism nonprofit, was slated to get $5 million in grants through Building a Stronger Future, a Bankman-Fried family foundation; it got the first third, and now the remaining two-thirds are on hold.

Charitable intent, we note, runs into trouble when backed by the volatility of the crypto markets, which in turn is what 1) fueled the fees that, in this model, would have been allocated to various causes and 2) underpinned SBF’s own net worth (which funded some philanthropic vehicles directly). Bankman-Fried’s liquidity had been tied up through owning a majority stake in FTX; when that business collapsed because of a massive run on the firm, so did what we might term SBF’s personal “currency.”

There now is no visibility into how, when, or if grants, past or present, would make it to their designated recipients.  Good will and good intent wind up losing out — especially when opaque, ultimately deeply flawed crypto businesses, lack of oversight and grandiose pronouncements are in the mix. Good works suffer too.