When FTX goes down, academics lose their grants and worry that they will have to pay back their loans.
After the crypto exchange FTX and its grant-making arm, the FTX Future Fund, went bankrupt, some researchers at top universities didn’t get the money they were promised, while others tried to pay back grants before they were told to.
The FTX Future Fund was started in February 2022. It was a part of the FTX Foundation, which was the charitable side of Sam Bankman-crypto Fried’s empire, which fell apart last year in what U.S. prosecutors called an “epic” fraud.
Federal prosecutors in Manhattan say that the founder of FTX stole billions of dollars from his customers to cover losses at his hedge fund, Alameda Research. He denies wrongdoing.
On November 11, 2022, FTX filed for bankruptcy. On the same day, the team behind the fund said in a blog post on an altruism forum that they had quit and would probably not keep their promises to the people who were given grants.
The post by Nick Beckstead, Leopold Aschenbrenner, Avital Balwit, Ketan Ramakrishnan, and William MacAskill said, “We deeply regret the difficult, painful, and stressful situation that many of you are now in.”
We tried to get in touch with Beckstead, Aschenbrenner, Ramakrishnan, and MacAskill for this article multiple times through LinkedIn, Twitter, and email, but they didn’t answer. Balwit didn’t want to say anything.
Representatives for FTX also didn’t want to say anything and wouldn’t say if the FTX Foundation was part of the bankruptcy process.
Korbinian Kettnaker, a PhD student at the University of Cambridge in Britain, told Reuters that he had to quit his studies in the philosophy of computer science because his funding from FTX fell through.
A Twitter profile of its activities says that Bankman Fried was the main source of money for the FTX Future Fund, which supported research on topics that “improve humanity’s long-term prospects.” It said it wanted to spend between $100 million and $1 billion in its first year, but it didn’t say where the money was coming from.
Announcements on the website say that at least 20 researchers at top universities, such as Cornell, Princeton, Brown, and Cambridge in Britain, received grants of more than $100,000 each. Based on these announcements, Reuters did the math and found that more than $13 million was given to research projects connected to universities.
Reuters asked Cornell, Princeton, Brown, and Cambridge for comments, but they did not answer.
TOLD TO LEAVE
Kettnaker started his PhD at the University of Cambridge in October. It is expected to take him four years. He received a Future Fund grant of $158,000 to cover his annual tuition fee of about 27,000 pounds ($33,620.40) and annual stipend of 18,000 pounds.
Kettnaker hadn’t gotten the grant money by November, but he thought it would come in time for his first end-of-term bill.
He told Reuters that when he first heard that FTX was going out of business, he didn’t realise that it would affect how he got money.
He said, “There was a strange moment when this faraway piece of world news and my life suddenly came together.”
The college gave Kettnaker until January 31 to find new money. Because he couldn’t find any, he asked that his spot be held for the rest of the school year and left on February 1.
Some students who had already gotten money from FTX had to deal with other issues, like what to do with money that might have come from fraud or what to do if FTX asked for it back to pay off creditors.
Under U.S. bankruptcy law, payments made within 90 days of a Chapter 11 bankruptcy filing could be subject to a “clawback order.” This means that researchers could be asked to give back grants.
In a press release on February 5, FTX said it was asking people who got payments from FTX’s debtors to return the money by the end of the month. It also said it could take legal action against people who don’t return the money voluntarily.
As of June 2022, snapshots of the website that have since been taken down show that the fund had spent $132 million on 262 grants and investments.
In its statement, FTX did not mention the FTX Future Fund by name.
One U.S. recipient of the FTX Future Fund who asked not to be named said they got a grant of more than $150,000. They are now trying to get the money back, but they wouldn’t say anything about how that is going.
Based on the numbers in online groups and forums, the student told Reuters that they thought there were hundreds of college students getting money in the range of $10,000 to $50,000.
Mark Felger, an attorney at the U.S. firm Cozen O’Connor, said that about a dozen people in Europe and the U.S. who had gotten between $100,000 and $2 million from the FTX Future Fund had gotten in touch with him.
“At this point in the process, it’s not clear how aggressively the FTX trustee will go after the smaller clawback claims,” he said.
The new CEO of FTX has said that getting FTX customers their money back is his top priority. However, none of the grant recipients Felger has mentioned have received formal demand letters.
“Many of the people are going to wait for now and see how the case goes,” he said, adding that FTX has two years from the date of the bankruptcy to file a clawback claim.