Much has rightly been 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 suffer as a result of this fraud as well: vulnerable and poor people worldwide who were lined up to benefit from the projects that FTX funded.
This includes many projects Future Fund supported that were meant to uplift the welfare of others, improve quality of life (especially in poor countries), and save lives. There was money set to help eliminate lead exposure for children worldwide, to help gifted children in poor regions of India excel, and to help develop a wide array of new vaccines, which may never materialize or may be left in legal limbo. For the organizations that did receive promised funding before FTX’s bankruptcy, there has been talk of clawbacks of grant money, but only time will tell.
Even though the clawbacks are also being targeted at nonprofits and charities, there was no logical way for them to know that the money was dirty. At a distance, everything looked solid—Bankman-Fried was a billionaire who was, until the scandal hit, promoted by the mainstream financial press as a genius. Organizations, especially those operating in developing countries, cannot be expected to do due diligence that the media doesn’t do.
[Clawbacks are a necessary part of ensuring that anyone who profits off of a Ponzi scheme helps to make those victimized by it whole again, or at least somewhat so. The clawbacks in the Madoff scam turned controversial, as they came primarily from smaller and earlier investors, but it was unfortunately necessary. I agree that the charities had no reason to think the money was dirty, but they certainly had to know that it came with some risk of it being less than solid. — Ed]
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