Last week’s collapse of cryptocurrency exchange FTX has left many investors uncertain about whether they can recover their funds. Also left high and dry are recipients and would-be recipients of philanthropy funded through the exchange, including some researchers, Science reports.
According to The Wall Street Journal, FTX held $16 billion in investor deposits, more than half of which it had lent to a sister company. But the exchange paused withdrawals after investors learned of this close financial relationship and tried to pull billions of dollars out of it. On Friday (November 11), FTX filed for bankruptcy. It is now reportedly under investigation by the Securities and Exchange Commission and the Justice Department .
Many of the grants given or promised by foundations linked to FTX were for organizations or groups focused on effective altruism (EA), an approach to philanthropy espoused by FTX founder and Chief Executive Sam Bankman-Fried in which donors try to do as much good as possible with the resources they have available. However, according to Science, the FTX-funded Future Fund also awarded millions of dollars for natural science initiatives. Those initiatives include 1DaySooner, which pushed for human challenge trials on SARS-CoV-2; Sherlock Biosciences, which is developing CRISPR-based diagnostics; an effort at HelixNano to make a universal coronavirus vaccine; and SecureBio, which is developing defenses against future pandemics.
On November 10, the leadership team of Future Fund resigned, writing in a statement: “We are devastated to say that it looks likely that there are many committed grants that the Future Fund will be unable to honor.”
Bankman-Fried, who is 30 years old, previously told interviewers that he went into finance because he believed he could do the most good by making a fortune and giving most of it away. According to Forbes, critics say he used EA to burnish his image.
Benjamin Soskis of the Center on Nonprofits and Philanthropy at the Urban Institute tells The New York Times that the fallout from the FTX collapse presents a “distorted fun-house mirror of a lot of the problems with contemporary philanthropy,” in which young donors control large fortunes. Such donors “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,” he says.