Expecting a non-profit to be so “robust” or “isolated” as to be invulnerable to potential clawback claims that all of its funding was the proceeds of recent fraudulent activity by insiders isn’t realistic. Maybe the FTX Foundation’s setup is more fragile than advertised in other ways, but I can’t imagine that any lawyer advising the Foundation would tell them it was OK to keep paying out on grants at the moment. If their in-house or outside counsel had researched in advance what should happen to this specific foundation if all the donations appeared to be linked to fraudulent activity . . . that attorney’s licensing authority would have some pointed questions about what the attorney knew and when! So the pause on payouts doesn’t really tell me anything useful.
As for the donor advised funds mentioned in the linked post, the monies legally belong to the DAFs and any potential clawback liability would be against the DAFs (not just against the FTX-aligned person’s account at the DAF). If I’m running a DAF in which an FTX-aligned person has an account, I am not releasing any money until I am absolutely sure I don’t have any clawback exposure. The admin fee on a large DAF account is a very low percentage of assets, and one cannot reasonably expect a DAF to justify running even a small risk of clawback.
Expecting a non-profit to be so “robust” or “isolated” as to be invulnerable to potential clawback claims that all of its funding was the proceeds of recent fraudulent activity by insiders isn’t realistic. Maybe the FTX Foundation’s setup is more fragile than advertised in other ways, but I can’t imagine that any lawyer advising the Foundation would tell them it was OK to keep paying out on grants at the moment. If their in-house or outside counsel had researched in advance what should happen to this specific foundation if all the donations appeared to be linked to fraudulent activity . . . that attorney’s licensing authority would have some pointed questions about what the attorney knew and when! So the pause on payouts doesn’t really tell me anything useful.
As for the donor advised funds mentioned in the linked post, the monies legally belong to the DAFs and any potential clawback liability would be against the DAFs (not just against the FTX-aligned person’s account at the DAF). If I’m running a DAF in which an FTX-aligned person has an account, I am not releasing any money until I am absolutely sure I don’t have any clawback exposure. The admin fee on a large DAF account is a very low percentage of assets, and one cannot reasonably expect a DAF to justify running even a small risk of clawback.