FTX Trustees Claw Back $8.5 Million Donor Advised Fund Contribution

After one of my publications sparked mild outrage last year, Joe Bankman sent me an encouraging email.  A “keep your chin up, kid” sort of thing.  Just a sentence or two. I was amazed at his kindness considering the turmoil engulfing his family at the time.  I responded with thanks and my own note of encouragement.  He probably didn’t need or want to hear it but I felt awkward.  I imagine he just wanted to be back in his academic world for a minute and that’s why he sent the note.  He probably didn’t want to be reminded, not even from a sympathetic person.  I can only relate minimally.  Many years ago, my oldest brother got in trouble on a very penny ante scale compared to FTX. I can still remember my parents’ silent anguish hovering in the house like a cloud of smoke for months.  The New York Times published an article focusing on the FTX families’ efforts to come to terms with the enormity of their storm.  It gives a fleeting glimpse of the parents’ struggles to understand how their wunderkinder ended up in such a mess.  That’s what they are still, just very smart kids who did something really really dumb on an international stage.  Deer in sudden headlights.  Here is a sample from the Times:

Mr. Bankman-Fried started working with Ms. Ellison, Mr. Singh and Mr. Wang in 2018, when he ran a crypto hedge fund, Alameda Research, in Berkeley, Calif. All recent college graduates, they bonded over a shared commitment to effective altruism — a philanthropic movement that calls on young people to donate most of their money to charity. Ms. Ellison’s parents were skeptical of her life decisions. She ignored the “standard parental advice” to buy a house and avoid storing all her savings on FTX, her father, Glenn Ellison, wrote to the court. “I was a bit shocked when the first tax receipt for a charitable contribution a hundred times larger than I would have thought a college student should make arrived in the mail,” Mr. Ellison wrote in a filing last month.

I told you last summer that FTX bankruptcy trustees were trying to claw back charitable contributions made at the behest of erstwhile FTX fiduciaries, some of whom are now serving prison sentences.  The trustees insist that the same fraudulent intentions motivating the business scam also motivated charitable donations made from the proceeds of that scam.  The Trustees have settled one such effort against the Silicon Valley Community Foundation.  From Bloomberg:

Silicon Valley, an administrator of donor-advised funds, agreed to transfer more than $8.5 million in cash and 34,000 proprietary FTX tokens (FTT) that it held in funds previously managed by executives Caroline Ellison and Nishad Singh. The deal resolves the need to litigate claims that the 2021 donations by those in Bankman-Fried’s inner circle amount to fraudulent transfers.  Ellison, who ran FTX-adjacent hedge fund Alameda Research and was romantically involved with Bankman-Fried, was recently sentenced to two years in prison for assisting her former boyfriend loot $8 billion worth of FTX customer funds. Singh, who was the company’s chief engineer, avoided prison time over his role in the fraud.

Here is the SVCF Claw back Agreement. 

darryll k. jones