FTX, an exchange for trading cryptocurrencies, quickly became bankrupt and defunct in November 2022. Its founder, Sam Bankman-Fried, is broke, and the 30-year-old former billionaire could be in serious legal trouble for his alleged financial improprieties. The Conversation asked Brian Mittendorf, an accounting scholar at The Ohio State University, to explain the significance of FTX’s implosion for philanthropy and the nonprofits Bankman-Fried supported.
What was the connection between FTX and philanthropy?
Though FTX was a cryptocurrency exchange, Bankman-Fried viewed it as something more: a vehicle to change the world through giving. Bankman-Fried often noted that his goal for his business was to make money in order to donate it to support a variety of social causes like global health and investigative journalism. Bankman-Fried was also a major donor to politicians in the Democratic Party, while FTX co-founder Ryan Salame gave millions to Republicans.
Bankman-Fried was an acolyte of Scottish philosopher William MacAskill and the effective altruism movement, which emphasizes causes that its supporters believe can do the most good. Many effective altruists “earn to give,” trying to make as much money as they can in order to maximize their charitable impact. In recent years, a growing number of effective altruists have also championed “longtermism” – the view that giving to causes that donors believe will greatly benefit future generations is a higher priority than meeting current needs.
The lines between FTX, the FTX Foundation – Bankman-Fried’s philanthropic collective – and a longtermist offshoot of that foundation called the FTX Future Fund were blurry. The promises for big giving, however, were clear, with Bankman-Fried pledging to donate the bulk of his fortune to assorted causes.
What’s the most immediate fallout of FTX’s demise for charities?
Soon after FTX collapsed, the FTX Future Fund’s entire staff resigned.
The team cited concerns about the legitimacy and integrity of FTX’s operations. By quitting as a group, the staffers signaled that the fund had halted disbursements, while also attempting to distance the broader effective altruism movement from its most famous adherent.
Though Bankman-Fried and his FTX-affiliated philanthropic endeavors were only getting started toward meeting their lofty ambitions, many charities and other organizations had already received funding, and many had obtained further promises for future funding. Those commitments now seem unlikely to ever be disbursed. Many recipients, including ProPublica – a nonprofit investigative media outlet – are no longer counting on receiving those funds.
All signs point to much of that promised giving being unlikely to materialize.