FTX attempting to recover millions donated to charities

FTX is trying to recover the millions that were donated to charities

Haru Invest

Defunct cryptocurrency exchange FTX and its founder Sam Bankman-Fried (SBF) have donated millions to charity. The Wall Street Journal (WSJ) reported on January 8 that the company’s new management is now trying to recover donations.

John. J. Ray, who currently heads FTX Management, said it was difficult to know the company’s total assets and liabilities and even how many bank accounts it had.

Federal prosecutors and regulators allege that SBF, FTX and its affiliates, which include defunct hedge fund Alameda Research, stole users’ money and poured billions of dollars into risky bets that didn’t work. FTX and its subsidiaries filed for bankruptcy in November 2022.

The SBF pled “not guilty” to several fraud charges earlier this week, and his criminal trial is scheduled for October 2023. An SBF spokesperson told WSJ that the charitable donations were made with commercial profits, not user money.

FTX’s philanthropic division of Futures has distributed more than $160 million to more than 110 nonprofits as of September 2022. According to an earlier release from the now-defunct Future Fund website, the donations were awarded to biotech startups and undergraduate researchers who They work on Covid-19 vaccines and pandemic preparedness, programs that provide online resources and guidance to STEM students in rural India and China, and nonprofits that are developing solar panels.

Even with the cryptocurrency market still in full swing through 2022, the Future Fund has pledged $3.6 million to AVECRIS to develop a genetic vaccine platform. It has also pledged $5 million to the Atlas Fellowship to support scholarships and a summer program for high school students.

The largest donation was made to biotech startup HelixNano, which received $10 million to conduct trials of a Covid-19 vaccine.

In a press release on December 19, 2022, FTX announced that it has been approached by several parties that want to return funds received from FTX and its affiliates.

For example, the nonprofit Center for Alignment Research, which focuses on machine learning, recently announced that it would return the $1.25 million grant it received from the FTX Foundation. It said the funds were “morally (if not legally) owned by clients or creditors of FTX.”

Similarly, on December 20, ProPublica, a not-for-profit investigative media outlet, said it would return $1.6 million it received from Building Stronger Futures, the SBF Family Foundation.

However, the problem is that many charities have already spent the money, or at least part of it, received from FTX and its affiliates. For example, the Good Food Institute, a nonprofit think tank focused on plant and cell-based meat alternatives, has spent the entirety of the money it received from two FTX grants, the Wall Street Journal reported.

In addition, Stanford Medical University, which received about $4.5 million, has spent some of the money. A spokesperson told the Wall Street Journal that it is holding the remaining funds pending legal clarification.

In an interview with the Wall Street Journal on December 3, the SBF told the WSJ that while most of his charitable donations have been sincere, some have been done to curry favor with the public. He said:

“When I pledged $2,000 to a brand-name charity as part of some promotions related to the FTX business, it was as much PR as anything else.”

Bankruptcy experts told the WSJ that whether or not charities must re-give FTX depends on whether the exchange was able to honor it at the time of the donation. Besides, companies that have received FTX funds may have added protection.

However, if the court declares FTX to be a Ponzi scheme, as the plaintiffs allege, the companies may be forced to return the money, according to the bankruptcy expert.

The SBF has also been one of the largest political donors in the United States, donating an estimated $80 million in 18 months. Ray also tries to get all the political donations back.

A day after the SBF arrest, Damien Williams, US Attorney for the Southern District of New York, said Alameda Research used “dirty money” stolen from users to donate millions to political parties in order to “buy bipartisan influence.”

Court filings indicate that FTX spent $7 million on food and more than $15 million on luxury hotels in the Bahamas in the nine months leading up to its bankruptcy.

Reuters reported that on January 7, US trustee Andrew Fara filed an objection to FTX’s plans to sell LedgerX and its divisions in Japan and Europe. FARA called for a full and independent investigation before the companies are sold as the companies may have information related to FTX bankruptcy and fraud.

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