FTX Collapse: Crypto-Funded Researchers Struggle with Sam Bankman-Fried's Sentencing

In a dramatic turn of events, Sam Bankman-Fried, the former CEO of the bankrupt cryptocurrency exchange FTX, was sentenced to 25 years in prison after being convicted of fraud and money laundering. The collapse of FTX has had far-reaching implications, including for research organizations and scientists who received funding from the company's charitable arms.

Before its downfall, FTX had allocated tens of millions of dollars to effective altruism, a movement that involves wealthy companies or individuals donating funds to charitable causes and tackling long-term risks to humanity. However, many of these organizations now face pressure to return the money to avoid legal action, causing significant operational costs and distress.

One research organization, which chose to remain anonymous, said that the situation was a "source of great stress and confusion." They had received funds "in good faith" but were now being pressed to return the money.

Jake Eberts, communications director of the medical-research advocacy organization 1Day Sooner, expressed frustration and disappointment. "It appeared, up until the fraud was revealed, that [FTX] had a genuine interest in making the world a better place," he said.

FTX and its parent company, the FTX Foundation, were responsible for managing more than $700 billion in annual cryptocurrency trading and were valued at $32 billion at their peak. However, Bankman-Fried was found to be siphoning money to a sister company and himself, leading to a mass withdrawal of funds by FTX customers and the company declaring bankruptcy in November 2022.

Before any fraudulent activity came to light, FTX had announced it would allocate some of its money to scientific organizations, charities, and individual researchers through the FTX Future Fund. The fund awarded more than 250 grants from March 2022. However, the collapse of FTX has left many of these organizations in a difficult situation, as they are now required to return the funds or face possible legal action.

One of the largest recipients of FTX Future Fund grants was Lightcone Infrastructure, a California-based company that promotes projects to tackle long-term goals for humanity. Lightcone received approximately $4 million from FTX, which amounted to "around 50 to 60%" of its total funds. The collapse of FTX "had a huge effect" on Lightcone, with the funds allocated to pay for the Lightcone Offices in Berkeley, California, which had to close in early 2023, and running the online forum for effective altruists, LessWrong.

The fallout from the FTX collapse is likely to continue, with many charities and organizations that received funds from the company negatively affected. The psychological impacts have been significant, and the perception of effective altruism itself has been damaged. Organizations that received funds from FTX are now grappling with the consequences, facing pressure to return the money at a significant operational cost. As the legal proceedings against Bankman-Fried continue, the future of effective altruism and crypto-funded research remains uncertain.

Source: <https://www.nature.com/articles/d41586-024-00960-6>