Some academics at prestigious universities are now without the funding they were promised as a result of the collapse of the cryptocurrency exchange FTX and its grant-making organization, the FTX Future Fund, while others are scrambling to repay donations before they were required to.

The FTX Future Fund, which was established in February 2022, was a component of the FTX Foundation, the charitable arm of Sam Bankman-Fried’s crypto empire, which collapsed last year as a result of what U.S. prosecutors termed an “epic” fraud.

The founder of FTX is charged by federal prosecutors in Manhattan of diverting billions of dollars in client cash to cover losses at his hedge fund, Alameda Research. He contests his guilt.

The team behind the fund declared via a blog post on an altruistic forum that they had quit and would probably not keep their promises to those who had been granted grants on November 11, 2022, the same day that FTX filed for bankruptcy.

“We deeply regret the difficult, painful, and stressful position that many of you are now in,” the post by Nick Beckstead, Leopold Aschenbrenner, Avital Balwit, Ketan Ramakrishnan and William MacAskill said.

Multiple attempts to reach Beckstead, Aschenbrenner, Ramakrishnan, and MacAskill by LinkedIn, Twitter, and email for this story were unsuccessfulNo comment was available from Balwit. 

Additionally, FTX representatives declined to comment or confirm if the FTX Foundation is involved in the bankruptcy proceedings.

Korbinian Kettnaker, a PhD student at the University of Cambridge in the United Kingdom, told Reuters that the failure of his funding from FTX prompted him to discontinue his studies.

According to a description of the FTX Future Fund’s operations posted on Twitter, Bankman-Fried provided the majority of the funding for studies that “improve humanity’s long-term prospects.” It stated without mentioning its endowment that it planned to spend between $100 million and $1 billion in its inaugural year.

By June 2022, 262 grants and investments totaling $132 million had been made by the fund, according to archival screenshots of its long-since-deleted website.

A minimum of 20 academics from prestigious colleges, including Cornell, Princeton, and Brown in the United States, as well as Cambridge in Britain, are said to have received funds totaling more than $100,000 each, according to announcements on the website. According to Reuters calculations based on these announcements, university-affiliated research initiatives got a total of more than $13 million.

Requests for comment from Cornell, Princeton, Brown, and Cambridge went unanswered.

Kettnaker started his four-year PhD program at the University of Cambridge in October after being granted a $158,000 Future Fund grant to cover his annual tuition costs of about 27,000 pounds ($33,620.40) and his 18,000-pound stipend.

Kettnaker anticipated receiving the grant payment in time for his first end-of-term bill, but it hadn’t been made by November.

He told Reuters that he initially did not realize how the collapse of FTX would effect his funds.

“There was a surreal moment where this distant piece of world news and my life suddenly interlocked,” he said.

His college gave Kettnaker until January 31 to secure fresh funds. When he failed to locate any, he requested that his enrollment be suspended for the remainder of the school year and left on February 1.

Despite being contacted for comment, the university did not react.

Some students who had previously received financial aid had to deal with additional issues, such as the moral dilemma of what to do with funds that might be connected to the proceeds of fraud allegations or what to do if FTX requested the money back to settle debts.

According to U.S. bankruptcy law, grants could be demanded back from researchers if they received them within 90 days of filing for Chapter 11 bankruptcy.

Receivers of payments from the debtors listed in the FTX bankruptcy filing were urged to return their money by the end of the month, according to a press release from FTX on February 5. The company also threatened legal action against recipients if they did not return the money voluntarily.

The FTX Future Fund was not mentioned expressly in FTX’s announcement.

One FTX Future Fund recipient in the United States, who requested anonymity, claimed to have gotten a grant worth more than $150,000. Although they were attempting to return the money, they were unable to comment on the procedure.

Based on data from online groups and forums, the student told Reuters they thought hundreds of university students were receiving grants in the $10,000–$50,000 range.

In the United States, Cozen O’Connor attorney Mark Felger claimed he had been contacted by around a dozen persons who had received between $100,000 and $2 million from the FTX Future Fund.

“It’s really unclear at this early stage of the proceedings how aggressively the FTX trustee will pursue the smaller clawback claims,” he said.

The recovery of assets to pay back FTX customers is the new CEO of FTX’s top priority, but according to Felger, none of the grant beneficiaries he has spoken to have received formal demand letters.

“Many of the folks are going to sit tight for now and see how the case plays out,” he said, adding that FTX has two years from the date of the bankruptcy to file a clawback claim.

(Adapted from Reuters.com)

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