The FTX Future Fund recently finished a large round of regrants, meaning a lot of people are approved for grants that have not yet been paid out. At least one person has gotten word from them that these payouts are on hold for now. This seems very worrisome and suggests the legal structure of the fund is not as robust or isolated as you might have thought. I think a great community support intervention would be to get clarity on this situation and communicate it clearly. This would be helpful not only to grantees but to the EA community as a whole, since what is on many people’s minds is not as much what will happen to FTX but what will happen to the Future Fund. (From the few people I have talked to, many were under the impression that funds committed to the Future Fund were actually committed in a strict sense, e.g. transferred to a separate entity. If that turns out not to be the case, it’s really bad.)
At least one person has gotten word from them that these payouts are on hold for now. This seems very worrisome and suggests the legal structure of the fund is not as robust or isolated as you might have thought.
If it turns out that committed funds were not liquid, that the legal structure wasn’t robust, and that grants promised won’t be honoured, that won’t just be ‘really bad’ - it will be egregious.
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.
I wouldn’t conclude much from the future fund withholding funds for now. Even if they are likely in the clear, freezing payments until they have made absolutely sure strikes me as a very reasonable thing to do.
That a situation where they are not “absolutely sure” can even occur is one of the major causes of worry here, regardless of the conclusions that can be drawn at this point.
The FTX Future Fund recently finished a large round of regrants, meaning a lot of people are approved for grants that have not yet been paid out. At least one person has gotten word from them that these payouts are on hold for now. This seems very worrisome and suggests the legal structure of the fund is not as robust or isolated as you might have thought. I think a great community support intervention would be to get clarity on this situation and communicate it clearly. This would be helpful not only to grantees but to the EA community as a whole, since what is on many people’s minds is not as much what will happen to FTX but what will happen to the Future Fund. (From the few people I have talked to, many were under the impression that funds committed to the Future Fund were actually committed in a strict sense, e.g. transferred to a separate entity. If that turns out not to be the case, it’s really bad.)
If it turns out that committed funds were not liquid, that the legal structure wasn’t robust, and that grants promised won’t be honoured, that won’t just be ‘really bad’ - it will be egregious.
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.
I wouldn’t conclude much from the future fund withholding funds for now. Even if they are likely in the clear, freezing payments until they have made absolutely sure strikes me as a very reasonable thing to do.
That a situation where they are not “absolutely sure” can even occur is one of the major causes of worry here, regardless of the conclusions that can be drawn at this point.