FTX, Dead for 3 Years, Donates $650,000: Effective Altruism, Benefiting Whom?
- Core Viewpoint: Following FTX's bankruptcy, its liquidation process has evolved into an expensive legal tug-of-war. The controversy surrounding a former employee's $650,000 charitable donation reveals a potential tendency for "wasteful litigation" by the bankruptcy estate managers, with massive legal fees depleting assets that could otherwise be used for creditor payouts.
- Key Elements:
- A former FTX employee, Rheingans-Yoo, was granted court approval to receive a $650,000 charitable donation based on employment terms, but the initial charity he selected was opposed by the bankruptcy estate due to perceived conflicts of interest.
- The bankruptcy estate refused his request to switch to another charity, citing wording in the legal documents ("the" instead of "a"), a stance criticized by the judge as "completely unreasonable," leading to the approval of a sanctions motion.
- The same employee faces another lawsuit from the FTX estate for up to $71.6 million, accused of lacking due diligence in managing charitable investments aimed at building influence for SBF.
- As of January 2025, the FTX bankruptcy case has generated nearly $1 billion in legal and advisory fees, exceeding the combined total of other major crypto bankruptcies, drawing criticism for inefficiency.
- Critics argue that exorbitant legal fees are eroding potential asset appreciation that creditors could have received, transforming the bankruptcy from a "charity machine" into a "lawyer's ATM."
Original | Odaily (@OdailyChina)
Author｜jk
In November 2022, the collapse of FTX shocked the entire crypto world and left a long-lasting scar on industry trust. The world's second-largest exchange went bankrupt within days. Its founder, Sam Bankman-Fried (SBF), was sentenced to 25 years in prison for fraud. $8 billion in customer funds vanished, and creditors were left to endure a torturously long claims process.
Recently, however, a new development has continued the FTX saga, shifting the protagonists from traders to lawyers and the narrative from charitable donations to legal battles. A case involving a $650,000 charitable donation is now unfolding, as reported by Odaily:
The Origin
The story begins in April 2022. FTX was at its peak, aggressively expanding its team. Ross Rheingans-Yoo, a trader who had previously worked at the prestigious Wall Street quantitative trading firm Jane Street, was recruited by SBF to join the FTX Foundation as a project lead.
Like many other informal arrangements at FTX, Rheingans-Yoo's employment terms were not formalized in a contract but were recorded in a shared Google Doc titled "Final Ross Terms." This document promised him "a discretionary bonus of at least $1 million," with half paid in cash and the other half as a donation to a charity of his choice.
This 50% cash, 50% charity compensation structure was a hallmark of FTX and SBF's own beliefs, closely intertwined with the Effective Altruism (EA) movement, and was part of FTX's public branding at the time. (Effective Altruism is a philosophical and social movement that advocates using reason and evidence to determine how to do the most good. SBF himself was a prominent figure in this movement, publicly stating that his purpose in entering finance was to "earn to give to charity.")
By September 2022, after Rheingans-Yoo had worked for about five months, SBF informed him that as a bonus for the first half of 2022, he would receive $650,000 in cash, plus "another $650,000 in directed grants to any Effective Altruism-driven charity you want."
Just two months later, in November 2022, FTX imploded. At the time of bankruptcy, Rheingans-Yoo had not yet informed FTX where to send that $650,000 charitable donation.
Here He Comes, Bearing Claims
After the bankruptcy, Rheingans-Yoo filed multiple claims with the bankruptcy court, including:
- A $275,000 cash bonus balance (he claimed he only received $375,000 of the $650,000)
- The $650,000 directed charitable grant
- Other unpaid wages
After a lengthy legal process, the bankruptcy judge ultimately ruled that he was entitled to the $650,000. Since FTX's bankruptcy liquidation ultimately achieved over 100% recovery for unsecured creditors, he received the full amount.
Rheingans-Yoo initially chose to donate the money to Manifold for Charity—the charitable arm of the prediction market platform Manifold Markets. This choice was unsurprising, as Manifold is closely tied to the Effective Altruism community, and Rheingans-Yoo himself serves on the board of Manifold for Charity.
However, the FTX bankruptcy estate team strongly objected to this arrangement. Their reasons included:
- FTX was suing Manifold to recover previously disbursed funds
- Rheingans-Yoo's board position at Manifold presented a clear conflict of interest
- He would directly control the distribution of these funds, meaning sending money to this charity was essentially putting it directly into his own pocket
More importantly, FTX's lawyers argued that this arrangement perpetuated the core pattern of FTX's fraud: "FTX insiders siphoning money from creditors to 'charities' to burnish personal reputations and benefit Effective Altruism acquaintances."
Faced with opposition, Rheingans-Yoo expressed willingness to compromise, proposing to instead designate the donation to another Effective Altruism charity: 1DaySooner Inc.—an organization dedicated to promoting human challenge trials to accelerate vaccine development.
However, Sullivan & Cromwell, the law firm representing the FTX bankruptcy estate, rejected this change. Their reasoning was astonishing: the court's order only permitted allocation to "the Effective Altruism-driven charity" (a specific one), not to "any Effective Altruism-driven charity" (any such charity).
In other words: because Rheingans-Yoo only had one chance to choose, and he chose wrong the first time, he could not choose another charity.
As Bloomberg's report sarcastically noted: "No lawyer can resist an opportunity like that—'Aha, if the document said "a," you'd get $650,000, but it says "the," so you don't.' This is what lawyers live for."
The Judge Wasn't Having It
In January 2025, during a hearing in Delaware bankruptcy court, Judge Karen B. Owens expressed strong dissatisfaction with the FTX estate team's technical objections.
Judge Owens ruled that Rheingans-Yoo could redirect the $650,000 to 1DaySooner Inc., because the FTX estate had "absolutely no credible basis whatsoever" to oppose the change.
She further criticized the FTX estate's actions as "completely unreasonable, with no basis in law or fact whatsoever," resulting in "wasteful litigation."
"I think the estate has been harmed, the claimant has been harmed, and the court has been harmed," Judge Owens stated during the hearing.
She also approved a motion for sanctions against the FTX estate, which is quite rare in bankruptcy cases.
However, the FTX bankruptcy estate did not give up. A week later, they filed an appeal, taking the case to the Delaware federal district court to continue challenging the ruling.
The Shadow of $71.6 Million
To understand why the FTX estate is so fixated on this $650,000, one must be aware of another, much larger lawsuit they have filed against Rheingans-Yoo.
In July 2023, FTX sued Rheingans-Yoo and several other defendants, seeking to recover $71.6 million in investments and donations. These funds, channeled through the FTX Foundation and the Latona Biosciences Group led by Rheingans-Yoo, flowed to six life sciences companies between February and October 2022, including Lumen Bioscience, GreenLight Biosciences, Riboscience, and others.
FTX's lawyers alleged that:
- Latona Biosciences Group was a "sham" non-profit registered in the Bahamas
- These investments were made without any due diligence or independent valuation
- Their true purpose was to accumulate political capital and influence for SBF, not genuine charity
- The transfers were intended to hinder, delay, or defraud present or future creditors
The lawsuit also targeted Nicholas Beckstead—the CEO of the FTX Foundation, a highly respected philosopher within the Effective Altruism community. Beckstead had worked for years at the University of Oxford's Future of Humanity Institute and Open Philanthropy, making significant contributions to the philosophy of "longtermism." When FTX collapsed, he and the entire Future Fund team resigned en masse, expressing "shock and profound sadness" in their resignation statement.
Rheingans-Yoo vehemently denies all allegations. He argues that:
- He was not part of SBF's "inner circle" and was unaware of FTX's fraudulent activities
- His work at Latona was solely for "bringing about positive outcomes for society"
- Each investment underwent careful analysis and due diligence
"Rheingans-Yoo was a loyal employee who found himself in a predicament not of his making," his lawyers wrote in court filings.
From Charity Machine to Lawyer ATM
In a sense, these two cases perfectly illustrate FTX's past and present.
The story ends here. But readers should ponder: in this case, is the FTX bankruptcy liquidation team necessarily righteous?
As the comment quoted at the beginning of the article stated, pre-bankruptcy FTX was "a giant machine moving money from crypto traders to Effective Altruism charities." The FTX Foundation claimed to have donated over $190 million before its collapse and had planned to donate $1 billion in 2022.
But post-bankruptcy, FTX became "a machine moving money to lawyers." Protracted legal battles have erupted over every charitable donation, every investment, every promise. The cost of these legal wars is epic.
According to the latest court records, as of January 2025, the FTX bankruptcy case had generated nearly $1 billion in legal and advisory fees—$948 million already paid, with over $952 million approved by the court. This makes FTX one of the most expensive bankruptcies in the US since Lehman Brothers ($6 billion) in 2008. Its fees even exceed the combined total of all other major crypto bankruptcies like Celsius, BlockFi, Genesis, and Voyager ($502 million).
The lead law firm, Sullivan & Cromwell alone, has charged over $248 million, with partner hourly rates as high as $2,165; financial advisor Alvarez & Marsal has billed approximately $306 million; even bankruptcy CEO John Ray III's consulting firm has received over $8 million.
John Ray III's own hourly rate is $1,300, approximately 9,019 RMB.
If you could earn ten thousand RMB per hour from a bankruptcy case, would you want it to end quickly or slowly?
More ironically, at one point in late 2023, the legal fee bill ($1.45 billion) even exceeded the actual customer shortfall ($1.422 billion). On a daily basis, at its peak, FTX was paying lawyers and advisors about $1.4 million per day, or $53,000 per hour. Critics point out that FTX had only 200 employees and operated for just 3 years, while Enron had 20,000 employees, fraud lasting nearly 10 years, and created 3,000 complex off-balance-sheet entities. Yet FTX is using 75% of Enron's bankruptcy costs to handle just 4% of the asset size. This litigation over $650,000 and $71.6 million is a microcosm of this ongoing "lawyer ATM."
Remember, all this money comes from FTX's post-collapse corporate accounts.
And FTX is gone, so who is there to control how much this dead behemoth pays its lawyers?
In other words, while damaged customers received 100% recovery on their principal, the potential profits from Bitcoin rising from $16,000 to $100,000, or Solana from $20 to $200, are gone. A significant portion of those potential profits ended up in lawyers' pockets.
Now you know why lawyers engage in "wasteful litigation," don't you?
Facebook co-founder Dustin Moskovitz, a major funder of the Effective Altruism movement, questioned on Twitter after FTX's collapse: "Either Effective Altruism encouraged Sam's unethical behavior, or it provided convenient rationalizations for it."
To Be Continued
As of now, this story is far from over. The FTX bankruptcy estate has filed an appeal (once again, why is that?), and the $650,000 donation case will continue in federal district court. The $71.6 million lawsuit is also still ongoing. The case described above is a snapshot of the chaos following FTX's bankruptcy.
How will these cases ultimately conclude? Will those life sciences companies be forced to return the investments? Will Rheingans-Yoo be found to have assisted in fraud? Will the $650,000 finally reach 1DaySooner's account? Odaily will continue to provide follow-up coverage.
