Edit: see Cate Hall’s comment for a better summary of the position under US law, and Molly’s comment re further information OP intends to share from its external counsel shortly.
Epistemic status: I am not a lawyer in either the United States, or in Antigua and Barbuda (where FTX Trading Ltd was registered). I’m also not an insolvency expert. Take all this with a grain of salt. This comment is not legal advice.
There are lots of things that might make answering this question in theory tricky, including identifying:
which FTX entity paid your grant;
which jurisdiction’s insolvency law applies;
whether that FTX entity was insolvent at the time it paid you;
whether the relevant insolvency law allows for clawing back payments made prior to filing for bankruptcy/liquidation/etc.
There are also practical questions—if there is a multibillion dollar hole arising from illegitimate payments from FTX entities to Alameda, then would the liquidator/US trustee (etc) bother coming after small amounts (e.g. a $25,000 grant)? This isn’t me suggesting that they wouldn’t—I genuinely do not know.
It looks as though the law in Antigua and Barbuda differs quite a bit from the United States law. This article suggests that Antigua and Barbuda law is that losses lie where they fall once the music stops.
I received a grant in March 2022, and I don’t feel especially worried right now. Even if it turns out that some FTX entities were insolvent then, my rough sense is that either Antigua and Barbuda law applies and losses lie where they fall or that if US law applies then the transfer won’t be considered a preferential transfer subject to clawback because it occurred more than 90 days before any filing for bankruptcy. (I don’t know if I am understanding the 90 day rule correctly, so please seek advice or look for yourself before making any decisions—this comment isn’t legal advice.)
If I had received a grant more recently, then I would feel less confident. I might avoid spending the grant until learning more.
If any insolvency lawyers read this, consider commenting (even if not under your actual name) - or PM me to suggest any corrections/clarifications.
As I commented to Cate, I would also think about whether any transfer could fall under 11 USC 548(a)(1)(B) which does not require actual intent to defraud creditors for something to be a “fraudulent transfer.” That is not an opinion on whether there are fraudulent transfers here, which (although a lawyer) I am not qualified to give.
This looks like the position under Bahamian law (which might be the relevant law, not Antigua and Barbuda law or US law, given FTX was operating in the Bahamas—I just don’t know how this actually works).
It’s worth noting that in the Bernie Madoff Ponzi scheme, victims were compensated largely by clawing back money previously withdrawn by people with no knowledge that Madoff was operating a Ponzi.
Hopefully, someone with more legal knowledge about this situation can comment, but given that fact, I wouldn’t consider clawbacks out of the question.
You’re most likely right due to the precedents you stated here. I wouldn’t rule out a clawback either because the government has to be able to restore/maintain trust in the system.
It’s why a thorough audit of EA’s finance is in order. Any auditor among us could reach out to CEA to help with this.
I don’t know how the criminal law works. But if it turns out that the money in the FTX Future Fund was obtained fraudulently, would it be ethical to keep spending it, rather than giving it back to the victims of the fraud?
I feel pretty sure that you are not ethically obliged to pay anything out of your savings. And you haven’t done anything wrong so I don’t think you have anything to feel guilty about.
I do not think this will apply to grantees. I think the people most liable are the members of the team running the FTX Fund at CEA. They would have to prove that they have no knowledge of the fraud, if the verdict so says.
I received a small grant from the FF. I was conflicted on whether to take it anyway, given that I didn’t see FTX (or any crypto company) in a good light even before this story. Now I feel somewhat worse about it.
I think there are a few things that would come into play here:
If we give the money back, assuming that’s even an option, does it go to someone in need or to someone rich?
Can we afford it? I think I could, so there’s a big chance I would choose to do this if requested. But I don’t expect anyone to burn their savings for this like Gideon said.
I’m currently participating in a program which was also funded by the FF, and which paid a much larger sum than my personal grant for things like my housing during the time of the program. So on the one hand this is something that for me would be harder to pay back. On the other hand:
At some point we have to consider ourselves far enough removed from the action—it’s not like we chose to get specifically FF money by participating. It’s not even like someone receiving a grant from the FF chose to participate in fraud.
I think, if grant money has been spent in good faith, then it makes ethical sense to treat it as gone and not needing to be repaid. I don’t think anyone should make themselves financially worse off for having received a grant.
Edit: see Cate Hall’s comment for a better summary of the position under US law, and Molly’s comment re further information OP intends to share from its external counsel shortly.
Epistemic status: I am not a lawyer in either the United States, or in Antigua and Barbuda (where FTX Trading Ltd was registered). I’m also not an insolvency expert. Take all this with a grain of salt. This comment is not legal advice.
There are lots of things that might make answering this question in theory tricky, including identifying:
which FTX entity paid your grant;
which jurisdiction’s insolvency law applies;
whether that FTX entity was insolvent at the time it paid you;
whether the relevant insolvency law allows for clawing back payments made prior to filing for bankruptcy/liquidation/etc.
There are also practical questions—if there is a multibillion dollar hole arising from illegitimate payments from FTX entities to Alameda, then would the liquidator/US trustee (etc) bother coming after small amounts (e.g. a $25,000 grant)? This isn’t me suggesting that they wouldn’t—I genuinely do not know.
It looks as though the law in Antigua and Barbuda differs quite a bit from the United States law. This article suggests that Antigua and Barbuda law is that losses lie where they fall once the music stops.
I received a grant in March 2022, and I don’t feel especially worried right now. Even if it turns out that some FTX entities were insolvent then, my rough sense is that either Antigua and Barbuda law applies and losses lie where they fall or that if US law applies then the transfer won’t be considered a preferential transfer subject to clawback because it occurred more than 90 days before any filing for bankruptcy. (I don’t know if I am understanding the 90 day rule correctly, so please seek advice or look for yourself before making any decisions—this comment isn’t legal advice.)
If I had received a grant more recently, then I would feel less confident. I might avoid spending the grant until learning more.
If any insolvency lawyers read this, consider commenting (even if not under your actual name) - or PM me to suggest any corrections/clarifications.
As I commented to Cate, I would also think about whether any transfer could fall under 11 USC 548(a)(1)(B) which does not require actual intent to defraud creditors for something to be a “fraudulent transfer.” That is not an opinion on whether there are fraudulent transfers here, which (although a lawyer) I am not qualified to give.
Where are you getting 90 days from? I found six months, although this was very quick and I could easily have missed something.
This looks like the position under Bahamian law (which might be the relevant law, not Antigua and Barbuda law or US law, given FTX was operating in the Bahamas—I just don’t know how this actually works).
Re the 90 day rule in the United States, see here under the heading ‘Avoidable Transfers’: https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
Just to reiterate, I’m not a US, Antigua+Barbuda or Bahamas lawyer, and this isn’t legal advice.
See the first bullet point in this comment
that’s pointing to US law, yes?
Yes, as was the part of Tyrone-Jay Barugh’s comment referencing the 90 day rule.
It’s worth noting that in the Bernie Madoff Ponzi scheme, victims were compensated largely by clawing back money previously withdrawn by people with no knowledge that Madoff was operating a Ponzi.
Hopefully, someone with more legal knowledge about this situation can comment, but given that fact, I wouldn’t consider clawbacks out of the question.
You’re most likely right due to the precedents you stated here. I wouldn’t rule out a clawback either because the government has to be able to restore/maintain trust in the system.
It’s why a thorough audit of EA’s finance is in order. Any auditor among us could reach out to CEA to help with this.
I don’t know how the criminal law works. But if it turns out that the money in the FTX Future Fund was obtained fraudulently, would it be ethical to keep spending it, rather than giving it back to the victims of the fraud?
I feel pretty sure that you are not ethically obliged to pay anything out of your savings. And you haven’t done anything wrong so I don’t think you have anything to feel guilty about.
I do not think this will apply to grantees. I think the people most liable are the members of the team running the FTX Fund at CEA. They would have to prove that they have no knowledge of the fraud, if the verdict so says.
Note that the Future Fund team do not work at CEA, they’re a separate organisation
I received a small grant from the FF. I was conflicted on whether to take it anyway, given that I didn’t see FTX (or any crypto company) in a good light even before this story. Now I feel somewhat worse about it.
I think there are a few things that would come into play here:
If we give the money back, assuming that’s even an option, does it go to someone in need or to someone rich?
Can we afford it? I think I could, so there’s a big chance I would choose to do this if requested. But I don’t expect anyone to burn their savings for this like Gideon said.
I’m currently participating in a program which was also funded by the FF, and which paid a much larger sum than my personal grant for things like my housing during the time of the program. So on the one hand this is something that for me would be harder to pay back. On the other hand:
At some point we have to consider ourselves far enough removed from the action—it’s not like we chose to get specifically FF money by participating. It’s not even like someone receiving a grant from the FF chose to participate in fraud.
I think, if grant money has been spent in good faith, then it makes ethical sense to treat it as gone and not needing to be repaid. I don’t think anyone should make themselves financially worse off for having received a grant.