3 months ago 3 min read

FTX is Trying to Recoup Millions that Were Given to Nonprofits


And some charity have already used the money, others are awaiting legal clarification, while some have willingly chosen to return the monies.

Former cryptocurrency exchange FTX's founder Sam Bankman-Fried (SBF) and others made significant charitable contributions. According to a Jan. 8 article in the Wall Street Journal (WSJ), the company's new management is currently working to retrieve the funds.

John. J. Ray, who is currently in charge of FTX management, has claimed that it was difficult to determine the firm's overall assets and liabilities, as well as the number of bank accounts it had.

SBF, FTX, and its affiliates, which include the now-defunct hedge fund Alameda Research, are accused by federal prosecutors and regulators of stealing user cash and investing billions of dollars in hazardous wagers that failed to pay off. In November 2022, FTX and its affiliates declared bankruptcy.

SBF entered a "not guilty" plea to a number of fraud-related accusations earlier this week. His criminal trial is scheduled for October 2023. According to an SBF spokesman who talked to WSJ, charitable donations were made using trading profits rather than user dollars.

As of September 2022, the charity arm of FTX, Future Fund, had distributed more than $160 million to more than 110 nonprofit organizations. A previous version of the Future Fund website, which is now defunct, stated that the funds were given to biotech startups and university researchers working on Covid-19 vaccines and pandemic preparedness, programs providing online resources and mentoring to STEM students in rural China and India, and non-profit organizations developing solar panels.

Future fund committed $3.6 million to AVECRIS to create a genetic vaccine platform, even if the cryptocurrency bear market will continue to be in full gear through 2022. Additionally, it promised to provide $5 million to the Atlas Fellowship in order to fund scholarships and a summer program for high school students.

The largest gift was given to biotech startup HelixNano, which would use the $10 million for Covid-19 vaccination testing.

On December 19, 2022, FTX announced in a press statement that it had been contacted by a number of parties who wanted to refund money they had received from FTX and its affiliates.

Alignment Research Center, a non-profit organization specializing in machine learning, recently declared that it would return the $1.25 million donation it had received from the FTX Foundation. The money "morally (if not legally) belongs to FTX consumers or creditors," the statement read.

Likewise, on December 20, the non-profit investigative news organization ProPublica said that it would refund the $1.6 million it had received from SBF's family foundation, Building A Stronger Future.

The issue is that many of the organizations have already spent all or a significant portion of the funds they received from FTX and its affiliates. For instance, according to WSJ, the Healthy Food Institute, a nonprofit think tank that focuses on plant- and cell-based meat substitutes, has already used all of the money from its two FTX grants.

Additionally, some of the $4.5 million that Stanford Medicine got has been spent. According to a spokesman, the company is hanging onto the remaining monies while it waits for legal clarification.

SBF admitted to WSJ in an interview on December 3 that while the majority of his philanthropic contributions were made sincerely, some were made to win over the public. He stated:

“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.”

According to bankruptcy experts who spoke with WSJ, whether charities are required to refund FTX contributions depends on whether the exchange was financially stable when the awards were given. Furthermore, businesses who received funding from the FTX Foundation might be better protected.

The bankruptcy expert cautions that the companies might have to refund the funds if the court determines that FTX is a Ponzi scheme, as the prosecutors contend.

With estimated donations of $80 million made in just 18 months, SBF was also among the top political donors in the United States. Ray also tries to get back all of the campaign contributions.

SBF was taken into custody the following day, and the U.S. In order to "purchase bipartisan influence," Alameda Research allegedly donated millions of dollars to political parties using "dirty money" that had been stolen from its subscribers.

According to court documents, FTX spent over $15 million on opulent hotels in The Bahamas and over $7 million on meals in the nine months before to its bankruptcy.

On January 7, U.S. Andrew Vara, a trustee, objected to FTX's plans to sell LedgerX and its operations in Europe and Japan. Before the companies were sold, Vara demanded a thorough and impartial inquiry because the companies might hold information about FTX's bankruptcy and fraud.

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