The defunct crypto exchange FTX and its founder Sam Bankman-Fried (SBF) at one time donated millions to charity. Now the company’s new management is trying to recoup the donations, the Wall Street Journal reported on Jan. 8. Stay until the end and discover all the details!
Fraud disguised as charity
Federal prosecutors and regulators allege that SBF, FTX and their affiliates, which include the defunct hedge fund Alameda Research, stole user funds and invested billions of dollars in risky bets that didn’t pan out. FTX and its affiliates filed for bankruptcy in November 2022.
SBF pleaded “not guilty” to multiple fraud charges earlier this week, and his criminal trial is scheduled for October 2023. An SBF spokesperson told the WSJ that the charitable donations were made from business profit, not funds. of the users.
Future Fund
FTX’s charitable division, the Future Fund, had doled out more than $160 million to more than 110 nonprofit organizations as of September 2022. According to an earlier version of the Future Fund’s now-defunct website, the donations were awarded to new biotech companies and university researchers working on covid-19 vaccines, as well as programs providing online resources and tutoring for STEM students in rural India and China.
The largest donation was made to biotech start-up HelixNano, which received $10 million to conduct trials for a Covid-19 vaccine. In a press release dated December 19, 2022, FTX announced that it had been approached by several parties wanting to return funds received from FTX and its affiliates.
Problems getting the money back
The problem, however, is that many of the charities have already spent the money, or at least some of it, received from FTX and its affiliates. For example, the Good Food Institute, a nonprofit think tank that focuses on plant-based and cell-based meat alternatives, has spent the entirety of the funds it received from two FTX grants, the WSJ reported.
Also, Stanford Medicine, which received about $4.5 million, has spent some funds. A spokesperson told the WSJ that it is holding the remaining funds while it awaits legal clarity.
Legal activity in the process
Bankruptcy experts told the WSJ that whether or not charities have to repay FTX grants depends on whether the exchange was solvent at the time of the donation. Additionally, companies that received funding from the FTX Foundation may have additional protection.
However, if the court declares that FTX is a Ponzi scheme, as prosecutors allege, the companies may have to repay the funds, according to the bankruptcy expert.
