FTX founder Sam Bankman-Fried’s aggressive embrace of “effective altruism” spewed donations at dozens of nonprofits, but now those groups are facing the possibility that they may be asked to give the money back. The crypto exchange’s collapse and bankruptcy means groups that received funding from FTX’s philanthropic entities could be asked to return that money — a legal move known as a clawback — so FTX’s account holders and creditors can be repaid.
“The unfortunate reality is that charities are vulnerable to clawback claims when a funder enters bankruptcy,” said Jason Lilien, a partner at the law firm Loeb & Loeb, LLP, who was speaking generally about nonprofits and clawback claims, not about the FTX case specifically. While there can be some exceptions in certain circumstances, Lilien said, generally speaking, the law does not let nonprofits avoid clawback attempts. That’s potentially bad news for nonprofits swept up in FTX’s orbit. Bankman-Fried has made charitable giving a central piece of his public image and FTX’s. The company’s website states that it was “founded with the goal of donating to the world’s most effective charities.” Bankman-Fried has championed “effective altruism,” a philosophy of giving which attempts to make evidence-based decisions about how to do the most good for humanity. FTX reportedly donated 1% of “net fees” to char …