FTX's collapse casts a pall on a philanthropy movement

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.

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.

This article originally appeared in The New York Times