The rapid bankruptcy of cryptocurrency exchange FTX last week also rocked the world of philanthropy, due to the donations and influence of FTX founder Sam Bankman-Fried in the “effective altruism” movement.
- Grants that crypto giant FTX has promised to several nonprofits are unlikely to be paid out after the company collapses
- Ex-CEO Sam Bankman-Fried was a pioneer of the “effective altruism” philanthropy movement.
- Other crypto firms may have been exposed by tokenizing on FTX’s exchange or by owning FTX’s native token FTT
The FTX Foundation — and other related charities funded primarily by Mr. Bankman-Fried and other senior FTX executives — says it has donated $190 million ($283 million) to numerous causes.
Earlier this year, the foundation’s Future Fund announced plans to donate an additional $100 million, with hopes of raising up to $1 billion in donations in 2022.
Because of the bankruptcy, that won’t happen now.
And donations to numerous charities, even those that have already received money from groups associated with Mr. Bankman-Fried, are now in doubt.
FTX, hedge fund Alameda Research and dozens of other related companies filed for bankruptcy protection in Delaware on Friday after the exchange experienced the cryptocurrency equivalent of a bank run.
Clients tried to withdraw billions of dollars from the exchange after worrying about whether FTX had enough capital.
Mr. Bankman-Fried has retired from the Company.
His net worth, which was estimated at $24 billion earlier this year, is all but gone, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.
On Thursday night, the FTX Future Fund’s leadership team resigned, warning grantees that they were unlikely to pay out the promised funds.
“We are devastated to say that there are likely many pledged grants that the Future Fund is unable to honor,” the team wrote in a joint post on the Effective Altruism Forum.
“We are so sorry it has come to this.”
ProPublica, the non-profit investigative journalism organization, said it was told by Building a Stronger Future, a foundation funded by Mr. Bankman-Fried, that the remaining two-thirds of its $5 million grant would go toward reporting on Pandemic Preparedness and Biothreats was now on hold.
ProPublica received one-third of the grant in February and expects one-third annually through 2024.
The nonprofit said Building a Stronger Future is reviewing its finances and is talking to other funders about taking on a portion of its grant portfolio.
“Regardless of what happens to the remainder of the grant, we are deeply committed to this important work and to the team we have assembled,” the nonprofit said in a statement.
Fall of the ‘most generous billionaire’
Mr. Bankman-Fried, 30, is the best-known supporter of the effective altruism social movement, which believes in prioritizing donations to projects that have the greatest impact on most people.
The movement also emphasizes that the lives of all people should be given equal weight, regardless of where they live now or whether they will inhabit future generations of the earth.
“I wanted to get rich, not because I like money, but because I wanted to donate that money to charity,” Mr. Bankman-Fried told an interviewer in a YouTube video titled “The Most Generous Billionaire,” posted last January Year was released by the producer Nuseir Yassin.
Mr. Yassin said he was disappointed that Mr. Bankman-Fried’s ouster had tainted the very idea of philanthropy, in addition to destabilizing cryptocurrency markets and losing client funds.
“The third terrible outcome is the loss of faith in the world of giving, in the world of effective altruism,” Mr Yassin said.
“And that’s what I find the saddest.”
Mr Yassin stressed that he was not paid to produce the video but said one of Mr Bankman-Fried’s companies invested a small amount in one of his other projects afterwards.
He urged people not to give up believing in the possibility that wealthy people really want to give away their money and not just signal virtue when they commit to it.
Some blame “goodwill” for the crypto crash
Some now blame Mr. Bankman-Fried’s effective altruistic mindset for FTX’s problems.
“Either[effective altruism]encouraged Sam’s unethical behavior or provided a practical justification for such actions,” tweeted Facebook co-founder Dustin Moskovitz, who also signed The Giving Pledge.
“Both are bad.”
William MacAskill, a philosophy professor at Oxford University and co-founder of the effective altruism movement, convicted Mr Bankman-Fried of alleged misuse of client funds.
“Sam and FTX had a lot of goodwill,” wrote Mr. MacAskill, who was also an unpaid advisor to the FTX Future Fund, in a thread on Twitter.
“And some of that goodwill has been the result of associating with ideas that I’ve nurtured throughout my career. If that good will was fraudulent, I am ashamed.”
Requests for comment have been sent to the largest grantees listed on the FTX Future Fund’s website, including other effective altruism advocates such as the Long-Term Future Fund and the Center for Effective Altruism and Longview.
The crypto industry braces for future outages
Several FTX investors have said they are writing their investment down to zero as the extent of the company’s contagion in the market remains unclear.
Other crypto firms could be exposed to FTX by holding tokens on the exchange or owning FTX’s native token, FTT, which plunged around 94 percent last week.
Some have given information about their involvement in FTX, including their main competitor Binance.
Binance CEO Changpeng Zhao sparked concern among investors on Nov. 6 when he tweeted that Binance would sell its stake in FTT.
Mr. Zhao said at a Twitter Spaces event on Monday that Binance had previously held $580 million ($866.80 million) worth of FTT, of which “we’ve only sold quite a small portion, we’re holding still a big bag”.
Embattled cryptocurrency lender BlockFi said it has significant exposure to FTX and withdrawals from its platform remain on hold.
“We have significant exposure to FTX and related companies, which includes obligations owed to us by Alameda, assets held at FTX.com and undrawn amounts on our line of credit with FTX.US,” BlockFi said.
In July, FTX had signed a deal with the troubled crypto lender to provide it with a $400 million revolving credit facility with an option to buy for up to $240 million.
Bankrupt crypto lender Celsius Network said in a tweet on Nov. 11 that it has 3.5 million serum tokens (SRM) on FTX, as well as around $13 million in loans to FTX-affiliated trading firm Alameda Research.
The loans are under-collateralised, mostly by FTT tokens, Celsius said.
Coinbase Global Inc said in a Nov. 8 blog post that it had $15 million worth of deposits on FTX. It said it had no exposure to FTT, no exposure to Alameda Research and no lending to FTX.
Crypto asset manager CoinShares has a $30.3 million exposure to crypto exchange FTX.
CoinShares CEO Jean-Marie Mognetti said the group’s financial health remained “strong” and its net asset value at the end of the third quarter was £240.6 million ($240.6 million).
Singapore-based crypto exchange Crypto.com announced on Nov. 14 that it had raised about $1 billion over the course of a year.
CEO Kris Marszalek said the company would prove wrong to any naysayers on the platform who are in trouble and that it has a robust balance sheet and takes no risks.
Crypto financial services firm Galaxy Digital Holdings Ltd said it had $76.8 million worth of exposure to FTX in its third-quarter earnings report on Nov. 9 — the day after FTX froze withdrawals $47.5 million ‘pending revocation’.
On the conference call, Novogratz said Galaxy had more than $1 billion in cash and $1.5 billion in cash.
Capital of Galois
Hedge fund Galois Capital had half of its assets tied up in FTX, co-founder Kevin Zhou told investors in a recent letter, the Financial Times reported, estimating the amount at around $100 million.
Galois did not respond to Reuters requests for comment via email and through his website.
US cryptocurrency broker Genesis Trading’s derivatives business has approximately $175 million in locked funds on FTX, the company said in a tweet on Nov. 10.
“Genesis has no significant exposure to FTT or other tokens issued by centralized exchanges,” the company said in a tweet on Nov. 9.
Cryptocurrency exchange Kraken said Nov. 10 that it held about 9,000 FTT tokens on the FTX exchange and was “not impacted in any material way.”
Kraken also said Sunday it had frozen the accounts of FTX, Alameda Research and their executives.
Silvergate Capital Corp
Silvergate Capital Corporation announced on Friday that FTX accounted for less than 10 percent of the $11.9 billion in deposits from all digital asset customers as of Sept. 30.
The digital asset financial solutions provider also said Silvergate has no outstanding loans or investments in FTX, and FTX is not a custodian for Silvergate’s Bitcoin-backed Silvergate Exchange Network (SEN) leveraged loans.
FTX won the assets of crypto lender Voyager Digital in a $1.42 billion bid
Voyager said Nov. 11 it had reopened the bidding process for the company and maintained about $3 million in balances with FTX as the embattled crypto exchange sought protection from creditors.
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