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The rapid collapse of cryptocurrency exchange FTX into bankruptcy last week has also shaken the world of philanthropy, due to the donations and influence of FTX founder Sam Bankman-Fried in the 'effective altruism' movement.
Key points:
- Grants promised to several non-profits by crypto giant FTX are unlikely to be paid out after the firm's collapse
- Ex-chief executive Sam Bankman-Fried was a frontrunner of the "effective altruism" philanthropy movement
- Other crypto firms may have been exposed by having tokens on FTX's exchange or by owning FTX's native token FTT
The FTX Foundation -- and other related non-profits mostly funded by Mr Bankman-Fried and other top FTX executives – says it has donated $US190 million ($283 million) to numerous causes.
Earlier this year, the foundation's Future Fund announced plans to donate an additional $US100 million, with hopes of donating up to $US1 billion in 2022.
Because of the bankruptcy, that won't be happening now.
And donations to numerous non-profits, even those that have already received money from groups related to Mr Bankman-Fried, are now in doubt.
FTX, the hedge fund Alameda Research, and dozens of other affiliated companies sought bankruptcy protection in Delaware on Friday after the exchange experienced the cryptocurrency equivalent of a bank run.
Customers tried to remove billions of dollars from the exchange after becoming concerned about whether FTX had sufficient capital.
Mr Bankman-Fried has resigned from the company.
His net worth, estimated earlier this year at $US24 billion, has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world's richest people.
On Thursday night, FTX Future Fund's leadership team resigned, warning grantees that they were unlikely to pay out promised funds.
"We are devastated to say that it looks likely that there are many committed grants that the Future Fund will be unable to honour," the team wrote in a joint post in the Effective Altruism Forum.
"We are so sorry that it has come to this."
ProPublica, the investigative journalism non-profit, said it has been told by Building a Stronger Future, a foundation funded by Mr Bankman-Fried, that the remaining two-thirds of its $US5 million grant to report on pandemic preparedness and bio-threats was now on hold.
ProPublica received one-third of the grant in February and expected one-third annually until 2024.
The non-profit said Building a Stronger Future was assessing its finances and talking to other funders about taking on some of its grant portfolio.
"Regardless of what happens with the remainder of the grant, we are deeply committed to this important work and the team we have assembled to pursue it," the non-profit said in a statement.
Downfall of 'the most generous billionaire'
Mr Bankman-Fried, 30, is the best-known proponent of the effective altruism social movement, which believes in prioritising donations to projects that will have the largest impact on the most number of people.
The movement also emphasises that the lives of all people should be weighted equally, regardless of where they live now or if they will inhabit the earth generations in the future.
"I wanted to get rich, not because I like money but because I wanted to give that money to charity," Mr Bankman-Fried told an interviewer in a YouTube video called " The Most Generous Billionaire," published in January last year by producer Nuseir Yassin.
Mr Yassin said he was disappointed Mr Bankman-Fried's downfall was dragging down the idea of philanthropy, in addition to destabilising cryptocurrency markets and customers losing funds.
"The third terrible outcome is loss of faith in the giving world, in the effective altruism world," Mr Yassin said.
"And I find that to be the saddest one."
Mr Yassin emphasised he was not paid to produce the video, but said one of Mr Bankman-Fried's companies did invest a small amount in one of his other projects afterwards.
He urged people not to give up faith in the possibility that wealthy people really do want to give away their money and are not just virtue signalling when they pledge to do so.
Some blame 'goodwill' for crypto crash
Some now blame Mr Bankman-Fried's effective altruism mindset for FTX's troubles.
"Either (effective altruism) encouraged Sam's unethical behaviour, or provided a convenient rationalisation for such actions," tweeted Facebook co-founder Dustin Moskovitz, who has also signed The Giving Pledge.
"Either is bad."
William MacAskill, a philosophy professor at Oxford University and a co-founder of the effective altruism movement, condemned Mr Bankman-Fried for allegedly misusing customer funds.
"Sam and FTX had a lot of goodwill," Mr MacAskill, who was also an unpaid advisor to the FTX Future Fund, wrote in a thread on Twitter.
"And some of that goodwill was the result of association with ideas I have spent my career promoting. If that goodwill laundered fraud, I am ashamed."
Requests for comment were sent to the largest grantees listed on the FTX Future Fund's website, including other effective altruism advocates like the Long-Term Future Fund and the Centre for Effective Altruism and Longview.
Crypto industry braces for future fall out
Several FTX investors have said they are writing their investment down to zero, as the extent of the company's contagion across the market remains unclear.
Other crypto firms may be exposed to FTX by having held tokens on the exchange or by owning FTX's native token, FTT, which plunged around 94 per cent last week.
Some have given information about their exposure to FTX, including their main rival Binance.
Binance
Binance's chief executive Changpeng Zhao sparked concerns among investors on November 6 when he said in a tweet that Binance would sell its holdings of FTT.
Mr Zhao told a Twitter spaces event on Monday that Binance had previously held $US580 million ($866.80 million) worth of FTT, of which "we only sold quite a small portion, we still hold a large bag".
BlockFi
Embattled cryptocurrency lender BlockFi said it had significant exposure to FTX and that withdrawals from its platform continue to be paused.
"We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US," BlockFi said.
In July, FTX had signed a deal with the troubled crypto lender to provide it with a $US400 million revolving credit facility with an option to buy it for up to $US240 million.
Celsius Network
Bankrupt crypto lender Celsius Network said in a tweet on November 11 that it had 3.5 million Serum tokens (SRM) on FTX as well as around $US13 million in loans to FTX-linked trading company Alameda Research.
The loans were under-collateralised, mostly by FTT tokens, Celsius said.
Coinbase
Coinbase Global Inc said in a blog post on November 8 that it had $US15 million worth of deposits on FTX. It said it had no exposure to FTT, no exposure to Alameda Research, and no loans to FTX.
CoinShares
Crypto asset manager CoinShares has $US30.3 million worth of exposure to crypto exchange FTX.
CoinShares chief executive Jean-Marie Mognetti said the group's financial health remained "strong", adding its net asset value at the end of Q3 was 240.6 million pounds ($240.6 million).
Crypto.com
Singapore-based crypto exchange Crypto.com said on November 14 it had moved about $US1 billion to FTX over the course of a year, but most of it was recovered and exposure at the time of FTX's collapse was less than $US10 million.
CEO Kris Marszalek said the firm would prove all naysayers wrong on the platform being in trouble, and that it has a robust balance sheet and took no risks.
Galaxy Digital
Crypto financial services company Galaxy Digital Holdings Ltd said in its third-quarter earnings statement on November 9 — the day after FTX froze withdrawals — that it had a $US76.8 million worth of exposure to FTX, of which $US47.5 million was "in the withdrawal process".
In the earnings call, Novogratz said Galaxy had more than $US1 billion in cash and $1.5 billion in liquidity.
Galois Capital
Hedge fund Galois Capital had half its assets trapped on FTX, co-founder Kevin Zhou told investors in a recent letter, the Financial Times reported, estimating the amount to be around $US100 million.
Galois did not respond to Reuters comment requests sent via email and its website.
Genesis
US cryptocurrency broker Genesis Trading's derivatives business has approximately $US175 million in locked funds on FTX, the company said in a tweet on November 10.
"Genesis has no material exposure to FTT or any other tokens issued by centralised exchanges," the firm said in a tweet on November 9.
Kraken
Cryptocurrency exchange Kraken said on November 10 that it held about 9,000 FTT tokens on the FTX exchange and was not affected "in any material way".
Kraken also said on Sunday it had frozen the accounts of FTX, Alameda Research and their executives.
Silvergate Capital Corp
Silvergate Capital Corporation said on Friday FTX represented less than 10 per cent of $US11.9 billion deposits from all digital asset customers as of September 30.
The financial solutions provider to digital assets also said Silvergate had no outstanding loans or investments in FTX, and FTX was not a custodian for Silvergate's bitcoin-collateralised Silvergate Exchange Network (SEN) leverage loans.
Voyager Digital
FTX won crypto lender Voyager Digital's assets in a $US1.42 billion bid at an auction in September months after the lender spurned an earlier proposal and called it a "low-ball bid dressed up as a white knight rescue".
Voyager said on November 11 it had reopened the bidding process for the company and maintained a balance of approximately $US3 million at FTX when the embattled crypto exchange filed for protection from creditors.
AP/Reuters