The FTX scandal exposes the dangers of relying on billionaire charity

by Arthur · February 13, 2023

The dramatic collapse of FTX and the recent arrest of crypto mogul Sam Bankman-Fried continues to send shock waves around the world, including among many non-profit organizations and charities. My organization, 1Day Africa, received money from FTX’s charitable arm, the Future Fund. I am struggling with what to do next.

The grant was awarded to support vaccine justice and pandemic preparedness efforts in Africa. 1Day Africa aimed to use the money to push for a pandemic insurance fund, an international fund that will receive annual contributions to be used to buy vaccines for all people during the next pandemic – especially for those in poor countries that have struggled to obtain themselves COVID-19 vaccines.

Five African nations proposed a vote on the idea in 2021 and 2022, but nothing came to the floor of the World Health Organization’s World Health Assembly (WHA). Liberia, Ghana, Guinea-Bissau, Sierra Leone and Gambia all submitted national requests to the WHA to include an additional item on the agenda. This was done according to WHO rules, although we did not get the proposal on the agenda. There was, and there is, a great need to have other WHA executive board members to support and advance the proposal. It is clear that more advocacy work is needed. This is a long neglected problem, which I myself lived through as a Zambian. I was elated that there was finally financial support that could help turn the tide.

Much has been rightly written about the suffering that FTX’s fraud caused, and I feel for those who lost their personal funds and savings. But there is another group that will also suffer as a result of this fraud: vulnerable and poor people all over the world who lined up to benefit from the projects that FTX financed.

This includes many projects that the Future Fund supported that were intended to improve the welfare of others, improve the quality of life (especially in poor countries) and save lives. Money was set aside to help eliminate lead exposure for children worldwide, to help gifted children in impoverished regions of India excel, and to help develop a wide range of new vaccines, which might never come to fruition or may be left in legal limbo. For the organizations that were promised funding before FTX’s bankruptcy, there has been talk of repayment of grant money, but only time will tell.

Although the refunds are also aimed at non-profits and charities, there was no logical way for them to know that the money was dirty. From a distance, everything looked solid – Bankman-Fried was a billionaire who, until the scandal hit, was promoted by the mainstream financial press as a genius. Organizations, especially those operating in developing countries, cannot be expected to do the due diligence that the media does not. Furthermore, the panic and anguish experienced by organizations such as mine must be understood from the point of the application process. Grant applications involve a significant amount of time and effort, making it very difficult to replace grants within a grant cycle – with no guarantee of success.

Even beyond the legal considerations, we are now left to wrestle with the question of whether it is justifiable to use tainted money, even for humanitarian purposes. Does justice demand that it be set aside? Does it matter if the money is returned to institutional investors with billions of dollars or individuals who have lost their savings?

As someone who lived in a house without electricity growing up—someone who walked about two miles one way to school in first grade in elementary school, crossing rivers and navigating through bushes—I have deeply appreciated the impact that was made by grants to lift and save lives in poor countries. There is ample, justifiable outrage against FTX and Bankman-Fried, but the outrage must also be informed about the plight of the secondary victims, for whom plans were made and money paid, and for whom nothing will be done.

The tragedy of FTX’s collapse for non-profits and charities is an inevitable result of the fact that global governance fails to fairly distribute resources and address inequalities. I was happy to read about how the Open Philanthropy movement views the situation in light of the people who still need help. They have indicated that grant recipients affected by the FTX collapse can apply for grants even if the focus of the grants is primarily on long-term work.

Meanwhile in Africa, hundreds of thousands of lives are lost to HIV, tuberculosis, malaria and diarrheal diseases every year. To me, these are not just victims of this one scandal, but also of the continuous neglect of many who are in a position to help. Getting assistance is not a right, but if we strive for a common humanity, then the situation for everyone must be within the framework.

The state of affairs – where the survival of hundreds of thousands of people must depend on individual philanthropists while governments abdicate and look the other way – must change. But we are still left with a system where a handful of individuals can have massive influence over global public goods. Their generosity should be commended, but it is an unstable system. At the very least, we must ask: Why are relatively few willing to operate on the scale of Bill Gates or Open Philosophy’s Dustin Moskovitz? The FTX fiasco should remind us of the fragility of a system built on the generosity of the rich.