A UK regulator is investigating the Effective Ventures Foundation, a charity connected to failed crypto exchange FTX, as its founder Sam Bankman-Fried, was a significant contributor to the foundation.
Bankman-Fried, who made a name for himself for his Robin Hood persona, charitable acts, and political donations, hit the headlines in April 2022 when he announced his intention to give away his wealth. But in November 2022, his company FTX went bankrupt. As a result, the Charity Commission in England and Wales has opened an inquiry into Effective Ventures.
FTX’s Bankruptcy Puts Effective Ventures’ Assets At Risk
The Effective Ventures Foundation and its affiliates are registered in England, Wales, the Netherlands, and the U.S. and provide support to organizations aligned with their goals.
The inquiry’s objective is to assess potential threats to the assets of Effective Ventures and ensure that the trustees fulfill their duties, as well as examine the relationship between trustees and donors.
We’ve opened an inquiry into Effective Ventures Foundation following the bankruptcy of a significant funder.
Read more: https://t.co/zjH1TdysYf pic.twitter.com/Qda9I0YwVP
— Charity Commission (@ChtyCommission) January 30, 2023
The Interim CEO of Effective Ventures, Howie Lempel, stated that the charity would continue cooperating with the inquiry. He also stated that the trustees have thoroughly evaluated the financial state, and the charity does not depend on FTX-related funds for future operations.
The Charity Commission stated that FTX’s bankruptcy is a “serious incident” due to the significant funding the exchange’s philanthropic foundation provided to its efforts. According to the Commission, there is no evidence of wrongdoing from trustees:
The inquiry has been opened to establish facts and help ensure the trustees protect the charity’s assets and are running the charity in line with their duties and responsibilities.
John Ray III Seeks To Recoup Charity Payments
While on the one hand, the bankrupted exchange gave money to charities, FTX owes billions to big firms and its users. While some charities have returned donations, others are reluctant.
The new FTX CEO and the agent in charge of the bankruptcy proceeding, John Ray III, urges others to follow suit. Ray and FTX warn of potential legal action against those who do not voluntarily return donations from the previous CEO.
The company enabled the following email as a contact for those looking to return the funds: [email protected]. In an official statement, the crypto exchange and the new management stated:
Recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from a FTX contributor does not prevent the FTX debtors from seeking recovery from the recipient or any subsequent transferee.
Alignment Research Center, a non-profit focused on machine learning, voluntarily returned $1.25 million to the new FTX management, believing that the funds morally belong to FTX customers, if not legally.
FTX Donations Under Scrutiny During Bankruptcy ProceedingsCharities receiving funds from FTX in the US were reportedly impacted during the exchange’s bankruptcy proceedings. FTX made significant donations to various groups and causes.
Some political campaigns have promised to return FTX and other Bankman-Fried-related funds. Still, it is uncertain if businesses and investors will be legally obliged to repay the company’s debtors.
Nevertheless, FTX’s new management seeks to retrieve donations from bankrupt firms to various charities and politicians. As of September 2022, the bankrupt firm had donated $160 million to over 100 non-profit organizations.
The Charity Commission began investigating the charity organization on Dec. 19, 2022, following the legal process outlined in the Charity Act of 2011.
FTX, its subsidiaries, and affiliates declared bankruptcy in November 2022, raising concerns about centralized crypto exchanges. Since its downfall under the leadership of Sam Bankman-Fried, new information previously kept secret is being exposed.
As per the reports, Australian regulators monitored FTX for six months before its collapse. FTX was operating with a suspended Australian Financial Services Licence, which it obtained through acquiring a locally regulated non-crypto company.
Featured image from Pixabay and chart from TradingView.com.
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