People have stated that the Future Fund gave out $200MM, but I haven’t independently confirmed that number.
That would likely be enough to offer significant compensation to smaller depositors who could demonstrate financial hardship. Since in this hypothetical, there is no legal obligation to return the money, grantees or the community would be free to set up a process that selects who will be compensated and how much using fair and non-biased criteria.
My own view is that we do not yet have enough information about the nature of what happened at FTX to know whether disgorging certain money is morally obligatory. I do not think grantees are morally on the hook for any future fraud FTX may have committed, but they are potentially on the hook to the extent their grants derived from fraud.
Jason—I agree that we don’t have enough information yet to make informed judgments about the moral obligations (if any) of Future Fund grant recipients. I’d just add a few points:
Insofar as we trust the relevant legal systems, it might be prudent to wait and see what the law obligates, rather than trying to front-run any legal judgments. The criminal charges and civil suits are likely to take a long time to litigate—precisely because they involve very complex issues that we can’t yet anticipate, and will involve discovery of thousands of documents and bits of evidence that we haven’t seen yet.
I’m generally opposed to the view that money can be ‘morally tainted’ more than one entity away, along the chain of ownership and responsibility. If FTX did wrong, but gave money to Future Fund, and then Future Fund gave money to EA grant recipients, and then EA grant recipients gave money to their landlords and grocery stores, how far along the economic trail does the moral taint travel? Should EAs pressure their landlords return their ‘tainted’ rent money, so we can return that money to Future Fund, so Future Fund can try to return that money to FTX depositors and investors?
I do take seriously the notion that returning some money might serve as some useful virtue signaling, PR management, costly commitment-signaling about our ethics, etc.; but I’m utterly baffled by how we could actually organize such a payback at the practical and legal levels. Who exactly would EAs wire-transfer the money to? What bank accounts, in what jurisdiction, overseen by what owners? How could such returns be documented in a legally credible way? What would be the tax implications for individuals and groups of voluntarily sending money to unknown entities that may or may not ever send it along to FTX investors or users (e.g. we might already be taxed on any income from Future Fund, even if we return all the money). How would we avoid sending money to pseudo-investors or pseudo-users who make fraudulent claims about losing money that they didn’t actually lose? Finally, if there are any legal ‘clawbacks’ of money in the future, that would have to be done through official legal channels—and they might not care that we’ve already sent money back somewhere for allegedly honorable reasons. So we might end up returning a bunch of money, and then being legally obligated to return the same amount again, and also being required to pay income tax on whatever we first received. None of these are unsolvable problems, perhaps, but we shouldn’t pretend that ‘returning the tainted money’ would be in any way simple, straightforward, or effective.
Good points. I think you’re absolutely right that everyone will have to wait for the legal system to play out before doing any additional returns that are morally required (to the extent that legal clawbacks have not addressed the extent of funds that need to be returned).
However, I think we will probably have enough information to discern what is morally obligatory well in advance of when the legal system sorts out what is legally obligatory—Madoff litigation is still proceeding over a decade after the Madoff scam imploded. If we know that returning $X is morally obligatory, then we know what the floor is. That awareness allows for a head start on how to deal with the situation. Early engagement with moral demands also shows that the community is attempting to grapple with the complexities of this situation rather than seeking to do the bare legal minimum.
I am not convinced that “Future Fund” is really that distinct an entity from FTX for taint purposes, since it seems to be a broad term compromising the FTX Foundation (whose board members were all senior FTX / Alameda people), DAFs linked to senior FTX people, etc. It is likely these entities had knowledge of the sheningans—I am not suggesting that the Future Fund staff did, but the entities did know.
I think that taint is broken not by the number of entities, but by the recipient providing reasonably equivalent value in exchange for what was received, without reason to believe the money was tainted. Removal of taint requires not just clean hands but also action to the recipient’s detriment that makes reversing the transaction substantially unfair. So, if FTX gave money to the FTX Foundation who gave it to a subgrantor who gave it yesterday to a charity for a project for which funds have not yet been irrevocably committed, I think all the money is still tainted. Likewise, if someone stole a car who gave it to my grandmother, who gave it to me, who gave it to my sister . . . it’s still stolen property no matter how many times it changes hands.
However, if FTX gave money for a certain conference, and the grantee has held or irretreviably committed that funding to the conference, the taint has been broken as long as the grantee had no reason to know of the taint. It is no longer possible for the grantee to reverse the grant without causing a concrete loss to itself (as opposed to a loss of expectancy). Likewise, if the original thief sells the car for a fair price to someone who had no reason to believe the car was stolen, it is morally OK for them to keep the car. Someone has to bear the concrete loss.
People have stated that the Future Fund gave out $200MM, but I haven’t independently confirmed that number.
That would likely be enough to offer significant compensation to smaller depositors who could demonstrate financial hardship. Since in this hypothetical, there is no legal obligation to return the money, grantees or the community would be free to set up a process that selects who will be compensated and how much using fair and non-biased criteria.
My own view is that we do not yet have enough information about the nature of what happened at FTX to know whether disgorging certain money is morally obligatory. I do not think grantees are morally on the hook for any future fraud FTX may have committed, but they are potentially on the hook to the extent their grants derived from fraud.
Jason—I agree that we don’t have enough information yet to make informed judgments about the moral obligations (if any) of Future Fund grant recipients. I’d just add a few points:
Insofar as we trust the relevant legal systems, it might be prudent to wait and see what the law obligates, rather than trying to front-run any legal judgments. The criminal charges and civil suits are likely to take a long time to litigate—precisely because they involve very complex issues that we can’t yet anticipate, and will involve discovery of thousands of documents and bits of evidence that we haven’t seen yet.
I’m generally opposed to the view that money can be ‘morally tainted’ more than one entity away, along the chain of ownership and responsibility. If FTX did wrong, but gave money to Future Fund, and then Future Fund gave money to EA grant recipients, and then EA grant recipients gave money to their landlords and grocery stores, how far along the economic trail does the moral taint travel? Should EAs pressure their landlords return their ‘tainted’ rent money, so we can return that money to Future Fund, so Future Fund can try to return that money to FTX depositors and investors?
I do take seriously the notion that returning some money might serve as some useful virtue signaling, PR management, costly commitment-signaling about our ethics, etc.; but I’m utterly baffled by how we could actually organize such a payback at the practical and legal levels. Who exactly would EAs wire-transfer the money to? What bank accounts, in what jurisdiction, overseen by what owners? How could such returns be documented in a legally credible way? What would be the tax implications for individuals and groups of voluntarily sending money to unknown entities that may or may not ever send it along to FTX investors or users (e.g. we might already be taxed on any income from Future Fund, even if we return all the money). How would we avoid sending money to pseudo-investors or pseudo-users who make fraudulent claims about losing money that they didn’t actually lose? Finally, if there are any legal ‘clawbacks’ of money in the future, that would have to be done through official legal channels—and they might not care that we’ve already sent money back somewhere for allegedly honorable reasons. So we might end up returning a bunch of money, and then being legally obligated to return the same amount again, and also being required to pay income tax on whatever we first received. None of these are unsolvable problems, perhaps, but we shouldn’t pretend that ‘returning the tainted money’ would be in any way simple, straightforward, or effective.
Good points. I think you’re absolutely right that everyone will have to wait for the legal system to play out before doing any additional returns that are morally required (to the extent that legal clawbacks have not addressed the extent of funds that need to be returned).
However, I think we will probably have enough information to discern what is morally obligatory well in advance of when the legal system sorts out what is legally obligatory—Madoff litigation is still proceeding over a decade after the Madoff scam imploded. If we know that returning $X is morally obligatory, then we know what the floor is. That awareness allows for a head start on how to deal with the situation. Early engagement with moral demands also shows that the community is attempting to grapple with the complexities of this situation rather than seeking to do the bare legal minimum.
I am not convinced that “Future Fund” is really that distinct an entity from FTX for taint purposes, since it seems to be a broad term compromising the FTX Foundation (whose board members were all senior FTX / Alameda people), DAFs linked to senior FTX people, etc. It is likely these entities had knowledge of the sheningans—I am not suggesting that the Future Fund staff did, but the entities did know.
I think that taint is broken not by the number of entities, but by the recipient providing reasonably equivalent value in exchange for what was received, without reason to believe the money was tainted. Removal of taint requires not just clean hands but also action to the recipient’s detriment that makes reversing the transaction substantially unfair. So, if FTX gave money to the FTX Foundation who gave it to a subgrantor who gave it yesterday to a charity for a project for which funds have not yet been irrevocably committed, I think all the money is still tainted. Likewise, if someone stole a car who gave it to my grandmother, who gave it to me, who gave it to my sister . . . it’s still stolen property no matter how many times it changes hands.
However, if FTX gave money for a certain conference, and the grantee has held or irretreviably committed that funding to the conference, the taint has been broken as long as the grantee had no reason to know of the taint. It is no longer possible for the grantee to reverse the grant without causing a concrete loss to itself (as opposed to a loss of expectancy). Likewise, if the original thief sells the car for a fair price to someone who had no reason to believe the car was stolen, it is morally OK for them to keep the car. Someone has to bear the concrete loss.
Jason—these are reasonable points. It’s a very complicated situation with many unknowns, but perhaps things will become clearer in the next few weeks.