FTX Wants to Claw Back Bankman-Fried’s Gifts to Charity

FTX wants to recoup the millions it and disgraced founder Sam Bankman-Fried gave to charity.

That might be easier said than done, The Wall Street Journal (WSJ) reported Saturday (Jan. 7), noting the latest wrinkle in the ongoing saga of the collapsed cryptocurrency exchange.

The problem, the WSJ report said, is that some of the funds donated by the FTX founder and accused crypto fraudster have already been spent.

For example, The Good Food Institute, a nonprofit think tank for non-meat food alternatives, said it has already spent all the money it got from a pair of FTX grants. A spokesperson for the institute told the WSJ the organization’s attorneys say the odds of having to give back the funds were slim, based on their grant agreement.

Other recipients have given their donations back, such as the journalism non-profit ProPublica, which last month said it would return the initial $1.6 million of what was to have been a three-year, $5 million grant from Building a Stronger Future, a foundation run Bankman-Fried and his brother, Gabe Bankman-Fried.

The WSJ said a big hurdle in recovering donations is determining when FTX became insolvent, assuming it was even solvent to begin with. If Bankman-Fried made a donation when his company was unable to pay its bills, that money might have to be returned because of bankruptcy law.

“This case is all about solvency,” Dov Kleiner, a bankruptcy partner at Kleinberg, Kaplan, Wolff & Cohen PC, told the WSJ.

Another wrinkle: FTX Foundation, the company’s charitable arm, might be considered a different entity. Charities that got money from FTX Foundation instead of FTX itself could have added protections, Kleiner said.

This isn’t the first time FTX has sought to recover Bankman-Fried’s donations. As PYMNTS wrote in December, the company has also taken steps to get back the millions in political contributions made by Bankman-Fried.

Those donations allegedly came from funds from FTX customers, something Bankman-Fried has denied.

FTX’s new management said last month it was “approached by a number of recipients of contributions or other payments” that wanted to give back the money they received from Bankman-Fried, his companies, or senior executives.

PYMNTS wrote in December that charitable intent runs into trouble “when backed by the volatility of the crypto markets.”

In the case of FTX, Bankman-Fried’s liquidity was tied up through owning a majority stake in his crypto company. When that company imploded, so did what might be described as SBF’s personal “currency.”

“There now is no visibility into how, when, or if grants, past or present, would make it to their designated recipients,” PYMNTS wrote. “Good will and good intent wind up losing out — especially when opaque, ultimately deeply flawed crypto businesses, lack of oversight and grandiose pronouncements are in the mix. Good works suffer too.”