FTX's collapse casts a pall on a philanthropy movement

Sam Bankman-Fried, the chief executive of the embattled cryptocurrency exchange, was a proponent and donor of the “effective altruism” movement

Photo: AFP
Photo: AFP

By Nicholas Kulish

Published: Tue 15 Nov 2022, 10:20 PM

Last updated: Mon 5 Dec 2022, 10:09 PM

In short order, the extraordinary collapse of the cryptocurrency exchange FTX has vaporized billions of dollars of customer deposits, prompted investigations by law enforcement and destroyed the fortune and reputation of the company’s founder and CEO, Sam Bankman-Fried.

It has also dealt a significant blow to the corner of philanthropy known as effective altruism, a philosophy that advocates applying data and evidence to doing the most good for the many and that is deeply tied to Bankman-Fried, one of its leading proponents and donors. Now nonprofits are scrambling to replace millions in grant commitments from Bankman-Fried’s charitable vehicles, and members of the effective altruism community are asking themselves whether they might have helped burnish his reputation.

“Sam and FTX had a lot of goodwill — and some of that goodwill was the result of association with ideas I have spent my career promoting,” philosopher William MacAskill, a founder of the effective altruism movement who has known Bankman-Fried since the FTX founder was an undergraduate at Massachusetts Institute of Technology, wrote on Twitter on Friday. “If that goodwill laundered fraud, I am ashamed.”

MacAskill was one of five people from the charitable vehicle known as the FTX Future Fund who jointly announced their resignation Thursday. In their statement, they said that “it looks likely that there are many committed grants that the Future Fund will be unable to honor.” Grant recipients worked on topics including pandemic preparedness and artificial intelligence safety.

MacAskill did not respond to a request for comment for this article.

Through a separate nonprofit called Building a Stronger Future, Bankman-Fried also gave to groups including news organizations ProPublica, Vox and the Intercept.

Grant on hold

In a note to staff members Friday, ProPublica’s president, Robin Sparkman, and editor-in-chief, Stephen Engelberg, wrote that the remaining two-thirds of a $5 million grant for reporting on pandemic preparedness and biothreats were on hold. “Building a Stronger Future is assessing its finances and, concurrently, talking to other funders about taking on some of its grant portfolio,” they wrote.

In a statement Sunday, a senior adviser to the foundation, Avi Zenilman, wrote: “While we don’t have information on the immediate future of Building a Stronger Future, it is clear that its scope and structure will need to change. However, the organizations and institutions it funded remain vitally important. We are hopeful that this work will continue in some way.”

“We are deeply sorry to everyone impacted by this shocking event, including our grantees and partners,” Zenilman added.

Benjamin Soskis, senior research associate in the Center on Nonprofits and Philanthropy at the Urban Institute, said that the issues raised by Bankman-Fried’s reversal of fortune acted as a “distorted funhouse mirror of a lot of the problems with contemporary philanthropy,” in which young donors control increasingly enormous fortunes.

“They gain legitimation from their status as philanthropists, and there’s a huge amount of incentive to allow them to call the shots and gain prominence as long as the money is flowing,” Soskis said.

FILE. Samuel Bankman-Fried, founder and CEO of FTX. Photo: AFP
FILE. Samuel Bankman-Fried, founder and CEO of FTX. Photo: AFP

Bankman-Fried’s fall from grace may have cost effective altruist causes billions of dollars in future donations. For a relatively young movement that was wrestling over its growth and focus, such a high-profile scandal implicating one of the group’s most famous proponents represents a significant setback.

His connection to the movement in fact predates the vast fortune he won and lost in the cryptocurrency field. Over lunch a decade ago while he was still in college, Bankman-Fried told MacAskill, the philosopher, that he wanted to work on animal-welfare issues. MacAskill suggested the young man could do more good earning large sums of money and donating the bulk of it to good causes instead.

Bankman-Fried went into finance with the stated intention of making a fortune that he could then give away. In an interview with The New York Times last month about effective altruism, Bankman-Fried said he planned to give away a vast majority of his fortune in the next 10 to 20 years to effective altruist causes. He did not respond to a request for comment for this article.

Effective altruism focuses on the question of how individuals can do as much good as possible with the money and time available to them. Historically, the community focused on low-cost medical interventions, such as insecticide-treated bed nets to prevent mosquitoes from giving people malaria.

More recently many members of the movement have focused on issues that could have a greater impact on the future, like pandemic prevention and nuclear non-proliferation as well as preventing artificial intelligence from running amok and sending people to distant planets to increase our chances of survival as a species.

In a few short years, effective altruism went from a somewhat obscure corner of charity favored by philosophy students and social workers to a leading approach to philanthropy for an increasingly powerful cohort of millennial and Gen-Z givers, including Silicon Valley programmers and hedge fund analysts.

Facebook and Asana co-founder Dustin Moskovitz and his wife, Cari Tuna, have said they are devoting much of their fortune to effective altruist causes.

“I don’t know yet how we’ll repair the damage Sam did and harden EA against other bad actors,” Moskovitz wrote in a tweet Saturday. “But I know that we’re going to try, because the stakes remain painfully high.”

As recently as last month, the umbrella FTX Foundation said it had given away $140 million, of which $90 million went through the FTX Future Fund dedicated to long-term causes. It is unclear how much of that money made it to the recipients and how much was earmarked for giving in installments over several years.

Asked whether he had set up any kind of endowment for his giving, Bankman-Fried said in the Times interview last month: “It’s more of a pay-as-we-go thing, and the reason for that, frankly, is I’m not liquid enough for it to make sense to do an endowment right now.”

Grant recipients

A significant share of the grants went to groups focused on building the effective altruist movement rather than organizations working directly on its causes. Many of those groups had ties to Bankman-Fried’s own team of advisers. The largest single grant listed on the Future Fund website was $15 million to a group called Longview, which according to its website counts MacAskill and the CEO of the FTX Foundation, Nick Beckstead, among its own advisers.

The second-largest grant, in the amount of $13.9 million, went to the Center for Effective Altruism. MacAskill was a founder of the center. Beckstead and MacAskill are on the group’s board of trustees, with MacAskill serving as the chair of the United Kingdom board and Beckstead as the chair of the U.S. subsidiary.

The FTX Foundation itself had little to no oversight beyond Bankman-Fried’s close coterie of collaborators. According to its website, the board of the FTX Foundation comprised Caroline Ellison, head of Alameda Research, the hedge fund Bankman-Fried founded; Gary Wang, chief technology officer of FTX; and Nishad Singh, director of engineering at FTX.

This article originally appeared in The New York Times

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