“I suggest also writing to the new FTX CEO to let him know the funds are being set aside in this way”
I worry that this could go badly wrong if an affected individual were to do this, in the following way:
(1) An affected grantee makes statements to FTX which imply that they believe all of the money that they were given rightfully belongs to FTX’s creditors, or could be interpreted in court to imply this
(2) The bankruptcy trustee sends out their routine demand letter. The grantee, having set the money aside, originally thought that they could repay GRANT_SIZE—AMOUNT_SPENT. Unfortunately, their government has treated their grant as income, so they had or will have to pay taxes on the amount that they were unable to deduct. Also, if they aren’t planning on trying to negotiate this settlement personally, they will need to enlist a lawyer, who will want their own chunk of any settlement. So they have to hope that the trustee will settle for (GRANT_SIZE—AMOUNT_SPENT—TAXES_OWED—LAWYER’S_FEES), as they will face financial ruin otherwise.
(3) The bankruptcy trustee, who might otherwise have been perfectly happy to settle for that amount, thinks they can do better, because they have the statement that grantee provided in (1) to wave around in court. Grantee has a much harder time arguing in court that they do not legally and morally owe this creditor GRANT_SIZE, given that the bankruptcy trustee has a document in grantee’s own words seeming to imply that grantee themselves believes they do legally and morally owe this amount. By the way, the creditor the bankruptcy trustee represents is not an original FTX retail or institutional investor at all, but is instead a Wall Street firm that has bought up FTX customers’ bankruptcy rights for pennies on the dollar, looking to turn a profit: https://www.nytimes.com/2022/11/18/business/ftx-assets-wall-street.html . In the end, the grantee might face bankruptcy.
The risks are clearest for individuals. Not sure to what degree an EA community statement similar to (1) would raise analogous risks for grantees or the community as a whole, I don’t really have the legal background to know how such a statement might wind up being deployed in court.
Fully agree that just continuing on with some prior plan to deploy the funds seems like a bad idea.
I hear what you’re saying about this being uncertain and scary to deal with as an individual, and if someone really doesn’t have any sense of the laws that might apply to their situation or what actions might be committal, that puts them in a really tough spot.
For donations that have been made to a literal individual who doesn’t have any practice operating a business, I really hope there can be some sort of organisation on top who can take care of this. They at least need to get together and work collectively, it’s prohibitive for someone who got like $15k or something to try to sort this out themselves.
But for organisations that are a bit larger (let’s say, something like over $1m per year operating budget), I’d expect them to be able to get some basic legal advice about where things stand, and then be able to reach out in a way that starts a conversation without committing them to some sort of disastrous position if things go wrong.
By the way, the creditor the bankruptcy trustee represents is not an original FTX retail or institutional investor at all, but is instead a Wall Street firm that has bought up FTX customers’ bankruptcy rights for pennies on the dollar, looking to turn a profit: https://www.nytimes.com/2022/11/18/business/ftx-assets-wall-street.html
It’s a good thing that there’s a secondary market for distressed debt. That market gives the creditors valuable options. They can get money out sooner if they need it, and trade from a position of low risk appetite with someone who has the funds and means to take on a larger risk.
The institutions who purchase the debt should be viewed as having the same ethical claim on the funds as the people who sold it to them. They’re the rightful creditors at that point.
By the way this also means a statement from the EA community could be relevant to some creditors, because it might affect their pricing. The FTX future fund is obviously not that big a pool of money, overall. But the investment in Anthropic could be 10% or more of the shortfall. If they announce that they’d prefer to unwind the investment if possible, that would be pretty relevant to the price of the debt.
The institutions who purchase the debt should be viewed as having the same ethical claim on the funds as the people who sold it to them. They’re the rightful creditors at that point.
They clearly have the same legal claim, but why do you consider them to have the same ethical claim to me? It seems completely different to me—whether they get more or less back doesn’t matter to the people to whom harm was done (it advantages future defraudees, maybe, but that doesn’t feel like EAs business)
Fair point re publicly TALKING about this maybe helping, but even then things are a drop in the bucket (Anthropic are a decently large chunk, but VC investments in for profit companies are wildly different situations than the one your post is about)
Regarding the secondary debt holders, my position is that FTX didn’t have the right to disperse the funds, and so the grantees who might have custody of the money currently don’t have any right to try to intervene in the outcome. Now, I use the term “rights” here, but really that’s just a shorthand for the rule utilitarianism I mentioned in the original post. I don’t believe in natural rights or something. I just think that society needs to coordinate around clear principles for things like property, and actions which go against those principles are almost always net bad.
So, the people with the title to the debt via the secondary market have the right and proper claim to the property. The people who are holding the property shouldn’t try to do anything but get out of the way.
When it comes to Anthropic, I’ve just seen from your profile that you work there. I understand that you might know much more about the situation, and also that you might not be able to comment on it.
Based on the information that’s available (which might paint a misleading picture), I’d say that SBF also didn’t have the right to make the investment into Anthropic. So it seems to me that the right thing for Anthropic to do would be to offer to buy back their shares. I think they should not prefer to have $500m in stolen money as investment capital. They should prefer to get their equity back and find another investor.
Again, I accept that there could be a lot of specifics about the situation that aren’t public, or where the information that’s available is wrong or misleading. But I do strongly believe that Anthropic needs to come forward and explain its position. So far the company hasn’t said anything at all in response to this.
Re the secondary debt holders, to me there are two different questions here. One of them is obeying whatever outcome of legal proceedings happens, where I think we both agree that people should fully obey the law. But the second is whether you should go above and beyond and be unsolicitedly cooperative with the legal proceedings, try to proactively allow money to be clawed back, etc. I agree that living in a society with strong, functional property rights is important, but don’t think that people going above and beyond in a complex situation like this is a core part of what makes property rights work (and, indeed, any system relying on that would have less reliable property rights!)
The people who are holding the property shouldn’t try to do anything but get out of the way.
I vibe with this, but to me this implies the first but not the second.
Re Anthropic, I used to work there, but left well before the FTX crisis, and have no particular position on those questions. I just think they’re a sufficiently different category to be worth clearly distinguishing from Future Fund donations to non-profits.
Anthropic is in a different category for a number of reasons. I believe FTX got something of value (equity in Anthropic) in exchange for the $500MM. If $500MM was in fact a reasonable market value for that equity at the time of the transaction, I don’t think Anthropic has any moral obligations here. It gave something of equal value to FTX for what it got. No one would argue that Pepsi has a moral obligation to repay FTX or its creditors if FTX had invested in Pepsi stock at fair market value and then that stock lost value. Of course, if the Anthropic share is worth more than $500MM, the estate can sell it and make some money.
On the other hand, if $500MM wasn’t a reasonable value for the equity share at the time of transfer, then I would view the portion of the $500MM that exceeded FMV as a de facto gift that needs to be returned.
I worry that this could go badly wrong if an affected individual were to do this, in the following way:
(1) An affected grantee makes statements to FTX which imply that they believe all of the money that they were given rightfully belongs to FTX’s creditors, or could be interpreted in court to imply this
(2) The bankruptcy trustee sends out their routine demand letter. The grantee, having set the money aside, originally thought that they could repay GRANT_SIZE—AMOUNT_SPENT. Unfortunately, their government has treated their grant as income, so they had or will have to pay taxes on the amount that they were unable to deduct. Also, if they aren’t planning on trying to negotiate this settlement personally, they will need to enlist a lawyer, who will want their own chunk of any settlement. So they have to hope that the trustee will settle for (GRANT_SIZE—AMOUNT_SPENT—TAXES_OWED—LAWYER’S_FEES), as they will face financial ruin otherwise.
(3) The bankruptcy trustee, who might otherwise have been perfectly happy to settle for that amount, thinks they can do better, because they have the statement that grantee provided in (1) to wave around in court. Grantee has a much harder time arguing in court that they do not legally and morally owe this creditor GRANT_SIZE, given that the bankruptcy trustee has a document in grantee’s own words seeming to imply that grantee themselves believes they do legally and morally owe this amount. By the way, the creditor the bankruptcy trustee represents is not an original FTX retail or institutional investor at all, but is instead a Wall Street firm that has bought up FTX customers’ bankruptcy rights for pennies on the dollar, looking to turn a profit: https://www.nytimes.com/2022/11/18/business/ftx-assets-wall-street.html . In the end, the grantee might face bankruptcy.
The risks are clearest for individuals. Not sure to what degree an EA community statement similar to (1) would raise analogous risks for grantees or the community as a whole, I don’t really have the legal background to know how such a statement might wind up being deployed in court.
Fully agree that just continuing on with some prior plan to deploy the funds seems like a bad idea.
I hear what you’re saying about this being uncertain and scary to deal with as an individual, and if someone really doesn’t have any sense of the laws that might apply to their situation or what actions might be committal, that puts them in a really tough spot.
For donations that have been made to a literal individual who doesn’t have any practice operating a business, I really hope there can be some sort of organisation on top who can take care of this. They at least need to get together and work collectively, it’s prohibitive for someone who got like $15k or something to try to sort this out themselves.
But for organisations that are a bit larger (let’s say, something like over $1m per year operating budget), I’d expect them to be able to get some basic legal advice about where things stand, and then be able to reach out in a way that starts a conversation without committing them to some sort of disastrous position if things go wrong.
It’s a good thing that there’s a secondary market for distressed debt. That market gives the creditors valuable options. They can get money out sooner if they need it, and trade from a position of low risk appetite with someone who has the funds and means to take on a larger risk.
The institutions who purchase the debt should be viewed as having the same ethical claim on the funds as the people who sold it to them. They’re the rightful creditors at that point.
By the way this also means a statement from the EA community could be relevant to some creditors, because it might affect their pricing. The FTX future fund is obviously not that big a pool of money, overall. But the investment in Anthropic could be 10% or more of the shortfall. If they announce that they’d prefer to unwind the investment if possible, that would be pretty relevant to the price of the debt.
They clearly have the same legal claim, but why do you consider them to have the same ethical claim to me? It seems completely different to me—whether they get more or less back doesn’t matter to the people to whom harm was done (it advantages future defraudees, maybe, but that doesn’t feel like EAs business)
Fair point re publicly TALKING about this maybe helping, but even then things are a drop in the bucket (Anthropic are a decently large chunk, but VC investments in for profit companies are wildly different situations than the one your post is about)
Regarding the secondary debt holders, my position is that FTX didn’t have the right to disperse the funds, and so the grantees who might have custody of the money currently don’t have any right to try to intervene in the outcome. Now, I use the term “rights” here, but really that’s just a shorthand for the rule utilitarianism I mentioned in the original post. I don’t believe in natural rights or something. I just think that society needs to coordinate around clear principles for things like property, and actions which go against those principles are almost always net bad.
So, the people with the title to the debt via the secondary market have the right and proper claim to the property. The people who are holding the property shouldn’t try to do anything but get out of the way.
When it comes to Anthropic, I’ve just seen from your profile that you work there. I understand that you might know much more about the situation, and also that you might not be able to comment on it.
Based on the information that’s available (which might paint a misleading picture), I’d say that SBF also didn’t have the right to make the investment into Anthropic. So it seems to me that the right thing for Anthropic to do would be to offer to buy back their shares. I think they should not prefer to have $500m in stolen money as investment capital. They should prefer to get their equity back and find another investor.
Again, I accept that there could be a lot of specifics about the situation that aren’t public, or where the information that’s available is wrong or misleading. But I do strongly believe that Anthropic needs to come forward and explain its position. So far the company hasn’t said anything at all in response to this.
Re the secondary debt holders, to me there are two different questions here. One of them is obeying whatever outcome of legal proceedings happens, where I think we both agree that people should fully obey the law. But the second is whether you should go above and beyond and be unsolicitedly cooperative with the legal proceedings, try to proactively allow money to be clawed back, etc. I agree that living in a society with strong, functional property rights is important, but don’t think that people going above and beyond in a complex situation like this is a core part of what makes property rights work (and, indeed, any system relying on that would have less reliable property rights!)
I vibe with this, but to me this implies the first but not the second.
Re Anthropic, I used to work there, but left well before the FTX crisis, and have no particular position on those questions. I just think they’re a sufficiently different category to be worth clearly distinguishing from Future Fund donations to non-profits.
Anthropic is in a different category for a number of reasons. I believe FTX got something of value (equity in Anthropic) in exchange for the $500MM. If $500MM was in fact a reasonable market value for that equity at the time of the transaction, I don’t think Anthropic has any moral obligations here. It gave something of equal value to FTX for what it got. No one would argue that Pepsi has a moral obligation to repay FTX or its creditors if FTX had invested in Pepsi stock at fair market value and then that stock lost value. Of course, if the Anthropic share is worth more than $500MM, the estate can sell it and make some money.
On the other hand, if $500MM wasn’t a reasonable value for the equity share at the time of transfer, then I would view the portion of the $500MM that exceeded FMV as a de facto gift that needs to be returned.