The collapse of crypto exchange FTX and its grant-making body, the FTX Future Fund, has left some researchers at top universities without the funds they were promised and others trying to repay grants before they could be ordered to.
Launched in February 2022, the FTX Future Fund was part of the FTX Foundation, the philanthropic arm of Sam Bankman-Fried’s crypto empire which fell apart last year, in what U.S. prosecutors called an “epic” fraud.
Federal prosecutors in Manhattan have accused the FTX founder of stealing billions of dollars in customer funds to plug losses at his hedge fund, Alameda Research. He denies wrongdoing.
On Nov. 11, 2022 – the same day that FTX filed for bankruptcy – the team behind the fund announced via a blog post on an altruism forum that they had resigned and would be unlikely to honour their commitments to those awarded grants.
“We deeply regret the difficult, painful, and stressful position that many of you are now in,” the post by Nick Beckstead, Leopold Aschenbrenner, Avital Balwit, Ketan Ramakrishnan and William MacAskill said.
Beckstead, Aschenbrenner, Ramakrishnan and MacAskill did not respond to multiple attempts to contact them via LinkedIn, Twitter and email for this article. Balwit declined to comment.
Representatives for FTX also declined to comment and declined to say whether the FTX Foundation is included in the bankruptcy proceedings.
PhD student Korbinian Kettnaker told Reuters he has been forced to drop out of his studies in the philosophy of computer science at Britain’s University of Cambridge after his funding from FTX fell through.
The FTX Future Fund supported research into topics that “improve humanity’s long-term prospects” and was funded primarily by Bankman-Fried, according to a profile of its activities published on Twitter. It aimed to spend between $100 million and $1 billion in its first year, it said, without disclosing its endowment.
The fund had spent $132 million across 262 grants and investments as of June 2022, according to archived snapshots of its now-deleted website.
Announcements on the website indicate there were at least 20 researchers at top universities including Cornell, Princeton and Brown in the United States, and Cambridge in Britain, who received grants of more than $100,000 each. University-linked research projects received more than $13 million in total, according to Reuters calculations based on these announcements.
Cornell, Princeton, Brown and Cambridge did not respond to Reuters’ requests for comment.
Kettnaker began his PhD at the University of Cambridge in October, expected to take four years, having successfully applied for a Future Fund grant of $158,000 to pay his approximately 27,000 pounds ($33,620.40) annual tuition fee and yearly stipend of 18,000 pounds.
The grant hadn’t been paid by November but Kettnaker expected it to arrive in time for his first end-of-term bill.
When he saw news of FTX collapsing, he did not realise at first that it would affect his funding, he told Reuters.
“There was a surreal moment where this distant piece of world news and my life suddenly interlocked,” he said.
Kettnaker’s college gave him a deadline of Jan. 31 to find new funding. Unable to find any, he asked to have his place put on hold for the rest of the academic year and left on Feb. 1.
The university did not respond to a request for comment.
Some students who had already received funding faced other problems, such as the ethical question of what to do with funding that might be related to the proceeds of alleged fraud or what to do if FTX demanded it back to pay creditors.
Under U.S. bankruptcy law, payments made within 90 days of a Chapter 11 bankruptcy filing could be subject to a “clawback order”, meaning researchers could be asked to hand back grants.
On Feb. 5, FTX said in a press release it was asking recipients of payments from the debtors in the FTX bankruptcy filing to return their funds by the end of the month, adding that it could take legal action against recipients if they do not return the money voluntarily.
FTX’s statement did not reference the FTX Future Fund specifically.
One FTX Future Fund beneficiary in the U.S., who asked not to be named, said they received a grant of more than $150,000. They are now trying to return the money but could not comment on the process.
The student told Reuters they believed there were hundreds of university students in receipt of funding in the $10,000 to $50,000 range, based on the numbers in online groups and forums.
Mark Felger, a lawyer at U.S. firm Cozen O’Connor, said he had been contacted by about a dozen people based in Europe and the United States who had received between $100,000 to $2 million from the FTX Future Fund.
“It’s really unclear at this early stage of the proceedings how aggressively the FTX trustee will pursue the smaller clawback claims,” he said.
FTX’s new CEO has said that his top priority is recovering assets to repay FTX customers, but Felger said none of the grant recipients he has spoken to have received formal demand letters.
“Many of the folks are going to sit tight for now and see how the case plays out,” he said, adding that FTX has two years from the date of the bankruptcy to file a clawback claim.
