FTX Seeks to Recoup Sam Bankman-Fried’s Charitable Donations

https://www.wsj.com/articles/ftx-seeks-to-recoup-sam-bankman-frieds-charitable-donations-11673049354

Nonprofits struggle to decide how to handle money received from bankrupt crypto exchange.

Sam Bankman-Fried and FTX doled out millions in charitable donations. Now, new management is asking for it back.

Some of the money, however, has already been spent, and the gifts flowed through myriad sources and agreements that are proving difficult to tally. 

Mr. Bankman-Fried, FTX and its affiliates used stolen customer money to pour billions of dollars into risky wagers that imploded, according to federal prosecutors and regulators. The company collapsed into bankruptcy in November.

Its undoing continues to ripple through the crypto world and beyond it, to academia, nonprofits and politics. FTX’s new management, led by CEO John. J. Ray, says it has been a challenge to determine the company’s assets, liabilities and even how many bank accounts it held. Customers whose money is locked up on the crypto exchange are wondering if they will ever get it back. Mr. Ray has asked for their patience but warned it will be a difficult road. 

Federal prosecutors have said Mr. Bankman-Fried used customer deposits to fund his trading firm and make political donations, and regulators have said he used customer money for personal expenses as well, like buying lavish real estate.

Mr. Bankman-Fried has pleaded not guilty to prosecutors’ charges. His spokesman said that charitable donations were all from trading profits, and not from customer deposits.

FTX’s new management is also trying to claw back donations that Mr. Bankman-Fried and other executives made to politicians and political groups. 

The company said in a press release that its new management has been approached by “a number of recipients of contributions or other payments” from FTX that want to return the money. The company has urged others to do the same. For those that don’t, FTX said, it will “commence actions before the bankruptcy court” to require that the money be returned, with interest.

Future Fund, FTX’s primary charitable arm,pledged more than $160 millionto more than 110 nonprofits as of September, according to its now-defunct website. Grantees included biotech startups and university researchers working on Covid-19 vaccines and pandemic preparedness studies; programs that provide online resources and mentoring to STEM students in underdeveloped parts of India and China; and a nonprofit building renewable solar panels in communities ranging from Appalachia to the Brazilian Amazon.

Millions of dollars were doled out just in 2022, per Future Fund’s former site, even as crypto prices were crashing. According to the old website: Future Fund pledged $3.6 million to AVECRIS to build the “next generation genetic vaccine platform,” and $5 million to the Atlas Fellowship to support scholarships and a San Francisco-based summer program for high-school students.

One of the largest pledges, according to the old website, was $10 million to biotech startup HelixNano to run “preclinical and Phase 1 trials of a pan-variant Covid-19 vaccine.” 

None of the organizations returned requests for comment.

Mr. Bankman-Fried often said philanthropy was his primary motivation for amassing a fortune.