I think this is a potentially stronger argument than the one in the original post, which decried all FTX money as “dirty” and said everyone who had it should return it. However, you’re making an assumption that the grantees received gifts, rather than advance compensation for work to be performed. I don’t think that assumption is correct for all or even most grants. There were grant contracts; I don’t think FTX gave Joe Smith $50K free and clear to do whatever he wanted to with the money. As I understand it, most of the contracts obliged Joe Smith to provide $50K worth of research labor for that $50K grant. If Joe Smith spent time conducting the research (when he could have been working for someone else), I think his status is similar to that of the janitor.
As I’ve said in several posts, I generally agree that unearned/unspent monies should be returned—I was responding to an original post that 100% of the funds should be returned in every case.
I wrote about a hypothetical janitor for two reasons: First, I didn’t feel the original comment explained why it was OK for anyone to receive any money ever received from FTX. It is fair to push someone’s stated policy position to its full logical extent. In response, you’ve qualified the original position and apparently clarified that it’s OK for someone to retain money paid for work they had already done. The question served its purpose of helping clarify the argument. Second, one could argue that certain senior FTX employees should give back already-earned funds because they were negligent in not detecting that a fraud was afoot. I think that argument is likely wrong, but using a blue-collar employee as the comparator avoids wading into that possibility.
Imagine person A steals your car. Person A then gives the car to Person B, who does not know at that point that the car is stolen. B is going to use the car to deliver food for a food bank or some other good purpose—A nods and gives B the car.
The police then find B has your car, and tell B that the car is stolen and belongs to you.
B starts looking at his shoes and shuffling his feet. He mumbles that he filled up the gas tank, and it was only half full when he got the car. Maybe he even put some new wiper blades on it. He keeps repeating that he didn’t know the car was stolen when A gave it to him, and that he was supposed to use it for good purposes.
It dawns on you that B is not going to return your car. B is straining to think up excuses to keep your car.
That’s how the FTX grant situation looks from the outside.
Grants are gifts. They are, as you say, up front payments, and in return you say you’re going to use them for some purpose, but it’s not an economic benefit to the grantee. It’s like a rich donor giving a university money to build a sports stadium—it’s a gift even though the university does have to use it to build the stadium.
In the scenario, B should return the car to you. If he doesn’t he may be committing the crime of refusing to return known stolen property.
I think there are some grantee situations in which your car metaphor generally makes sense. But I think there are others that look more like this:
Thief steals $3000. Thief gets in a car crash. Thief takes car to Innocent Mechanic, who spends significant time and resources repairing the car pursuant to a contract with Thief (without knowledge the money was stolen). Thief pays Innocent Mechanic with the $3000 and picks up the car. Thief is caught, has a heart attack (crashing the car which is now worthless), and dies without a penny to his name. Innocent Victim comes in and demands the $3000 back. Innocent Mechanic asserts the right to be compensated for the work he has performed in good faith and without knowledge his fee was stolen.
Either Innocent Mechanic or Innocent Victim is going to get unfairly screwed here. Assuming he is actually innocent, I think it is OK for Innocent Mechanic to keep the money. Although I feel bad for Innocent Victim, it’s necessary for the smooth functioning of society that workers are confident they will be able to keep fair wages for the work they performed. That’s why mechanics’ liens exist, for instance, and why unpaid wages get priority treatment in bankruptcy. So if you (1) told me this story, (2) told me there was a 1⁄10 chance I was Innocent Mechnic, a 1⁄10 chance I was Innocent Victim, and a 8⁄10 chance I was random member of society, and (3) made me decide who should suffer the loss—I would have said Innocent Victim. That has nothing to do with what I think of the merits of the grants at issue here.
Just saw your clarification—I don’t think it matters that there was no economic benefit to the grantor; the detriment to the grantee is sufficient to establish the grantee’s legitimate interest in retaining the money (to the extent of that detriment). Charities serve important social functions. While I do not generally think charities should get privileged status compared to other transferees, I generally don’t think they should get inferior status either. Hence my inclination to treat them like other vendors here.
I think this is a potentially stronger argument than the one in the original post, which decried all FTX money as “dirty” and said everyone who had it should return it. However, you’re making an assumption that the grantees received gifts, rather than advance compensation for work to be performed. I don’t think that assumption is correct for all or even most grants. There were grant contracts; I don’t think FTX gave Joe Smith $50K free and clear to do whatever he wanted to with the money. As I understand it, most of the contracts obliged Joe Smith to provide $50K worth of research labor for that $50K grant. If Joe Smith spent time conducting the research (when he could have been working for someone else), I think his status is similar to that of the janitor.
As I’ve said in several posts, I generally agree that unearned/unspent monies should be returned—I was responding to an original post that 100% of the funds should be returned in every case.
I wrote about a hypothetical janitor for two reasons: First, I didn’t feel the original comment explained why it was OK for anyone to receive any money ever received from FTX. It is fair to push someone’s stated policy position to its full logical extent. In response, you’ve qualified the original position and apparently clarified that it’s OK for someone to retain money paid for work they had already done. The question served its purpose of helping clarify the argument. Second, one could argue that certain senior FTX employees should give back already-earned funds because they were negligent in not detecting that a fraud was afoot. I think that argument is likely wrong, but using a blue-collar employee as the comparator avoids wading into that possibility.
You make some persuasive points.
Imagine person A steals your car. Person A then gives the car to Person B, who does not know at that point that the car is stolen. B is going to use the car to deliver food for a food bank or some other good purpose—A nods and gives B the car.
The police then find B has your car, and tell B that the car is stolen and belongs to you.
B starts looking at his shoes and shuffling his feet. He mumbles that he filled up the gas tank, and it was only half full when he got the car. Maybe he even put some new wiper blades on it. He keeps repeating that he didn’t know the car was stolen when A gave it to him, and that he was supposed to use it for good purposes.
It dawns on you that B is not going to return your car. B is straining to think up excuses to keep your car.
That’s how the FTX grant situation looks from the outside.
Grants are gifts. They are, as you say, up front payments, and in return you say you’re going to use them for some purpose, but it’s not an economic benefit to the grantee. It’s like a rich donor giving a university money to build a sports stadium—it’s a gift even though the university does have to use it to build the stadium.
In the scenario, B should return the car to you. If he doesn’t he may be committing the crime of refusing to return known stolen property.
I think there are some grantee situations in which your car metaphor generally makes sense. But I think there are others that look more like this:
Thief steals $3000. Thief gets in a car crash. Thief takes car to Innocent Mechanic, who spends significant time and resources repairing the car pursuant to a contract with Thief (without knowledge the money was stolen). Thief pays Innocent Mechanic with the $3000 and picks up the car. Thief is caught, has a heart attack (crashing the car which is now worthless), and dies without a penny to his name. Innocent Victim comes in and demands the $3000 back. Innocent Mechanic asserts the right to be compensated for the work he has performed in good faith and without knowledge his fee was stolen.
Either Innocent Mechanic or Innocent Victim is going to get unfairly screwed here. Assuming he is actually innocent, I think it is OK for Innocent Mechanic to keep the money. Although I feel bad for Innocent Victim, it’s necessary for the smooth functioning of society that workers are confident they will be able to keep fair wages for the work they performed. That’s why mechanics’ liens exist, for instance, and why unpaid wages get priority treatment in bankruptcy. So if you (1) told me this story, (2) told me there was a 1⁄10 chance I was Innocent Mechnic, a 1⁄10 chance I was Innocent Victim, and a 8⁄10 chance I was random member of society, and (3) made me decide who should suffer the loss—I would have said Innocent Victim. That has nothing to do with what I think of the merits of the grants at issue here.
Just saw your clarification—I don’t think it matters that there was no economic benefit to the grantor; the detriment to the grantee is sufficient to establish the grantee’s legitimate interest in retaining the money (to the extent of that detriment). Charities serve important social functions. While I do not generally think charities should get privileged status compared to other transferees, I generally don’t think they should get inferior status either. Hence my inclination to treat them like other vendors here.
Meant “not an economic benefit to the grantor”