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EV US has made a court motion to settle with the FTX estate for 100% of the funds received in 2022 for a total of $22.5M. See this public docket for the details: (Memo number 3745). 

My guess is Open Phil is covering this amount. Seems very relevant to anyone who is exposed to FTX clawback risk, or wants to understand what is going on with FTX things.

Cross posting from here


Thanks for flagging! New donations won’t be used for this settlement. The funding for the settlements has already been secured, and none of EV’s projects will need to allocate any additional funding. Besides funding that came from FTX, no funds that have previously been donated to a specific project will be used as part of this settlement.

As noted by Jason, the EV US settlement remains subject to court approval, and we won’t be commenting on it further while the settlement process is still underway. With that being said, we didn’t want any misunderstandings to disrupt CEA’s fundraising efforts in the meantime. 

Also, as a minor correction, the motion to approve the settlement was not filed by EV US – it was filed by the FTX debtors (this is standard practice for approval of settlements in bankruptcy cases).

Totally unsurprising to me.  

Why would EV US have settled?

(1) Most likely, EV US concluded that it had zero viable defenses to the clawback claims for 2022 transfers, and got concessions to drop clawbacks on the 2018 & 2019 claims. The estate's EV of litigating the 2018/19 claims may have been negative or minimal anyway, as there may have been viable to strong defenses for those.

(2) Plausibly, EV US thought that the financial expected value of litigation was positive, but that the optics costs were too high.

(3) Conspiratorally, EV US really wanted that release from discovery obligations in paragraph 9 of the stipulation (Doc. 3745-2 at 9). This is very unlikely, given that the stipulation expressly specifies that it does not impair the right to demand discovery from EV UK (which likely "knows" the bulk of what EV US would know).

One possible silver lining for some grantees is the recitation that pursuit of litigation against many smaller re-grantees would have been uneconomical (Doc. 3745 at 9, para. 23). There is also a recitation that recipients of re-grants from EV US may have had some additional defenses (id. at 8, para. 21, probably alluding to 11 USC 550(b)(1)), although without any detail it is hard to say whether the FTX estate's lawyers really believe this or whether it is the standard sort of possibility one mentions when asking a bankruptcy judge to sign off on a settlement.

Can you explain in more straightforward terms what this means?

Very quickly, what I assume:
1. Pre-FTX-crisis, FTX funded EV for ~$22mil.
2. Post-FTX-bankruptcy, the current FTX bankruptcy lawyers are coming after many groups that FTX gave money to for clawbacks. I assume they threatened EV US with legal action, unless the money was fully returned.
3. The final agreement between the two is for EV US to give back all $22mil to FTX debtors. 

Very close. There were also some transfers in 2018 & 2019, totalling about $2.7MM. There was $22.54MM transferred in 2022, for a total of $25.24MM (some numbers rounded). The estate is basically giving up on recovering the 2018/2019 transfers in exchange for getting 100% of the 2022 ones back. 

I suspect the defenses on the 2018 transfers in particular were much more viable -- they were more than four years prior to bankruptcy filing, which (relying on memory) is a very important threshold in applicable law. In addition, that Alameda was insolvent may be much murkier in 2018 than in 2022. (The 2019 transfers were tiny, so they were probably an afterthought.) I don't have a firm opinion on whether they were winning, but if you offered me $100 if I correctly guessed whether the estate would win on the 2018 transfers, I'd say "no."

Thanks for the clarity here! 

I wonder what EV projects the money was dedicated for. Which project actually ended up with a budget shortfall?

It's in Doc. 3745 -- this is for the EV US settlement only, the earmarks for the smaller EV US settlement are not included. TL;DR: Mostly CEA and Longview with 2.5MM for Atlas Fellowship, about 750K each for LTFF and GWWC. 

Someone needs to confirm whether ordinary donor funds might be used to cover any charge to LTFF, as that might influence some folks' end of year decisions. Edit: Zach confirmed they will not.

(FYI, Atlas won't be ending up with a budget shortfall as a result of this.)

I was reading the Charity Commission report on EV and came across this paragraph: 

During the inquiry the charity took the decision to reach a settlement agreement in relation to the repayment of funds it received from FTX in 2022. The charity made this decision following independent legal advice they had received. The charity then notified the Commission once this course of action had been taken. The charity returned $4,246,503.16 USD (stated as £3,340,021 in its Annual Report for financial year ending 30 June 2023). The Commission had no involvement in relation to the discussions and ultimate settlement agreement to repay the funds.

This seems directly in conflict with the settlement agreement between EV and FTX which Zachary Robinson summarized as: 

First, we’re pleased to say that both Effective Ventures UK and Effective Ventures US have agreed to settlements with the FTX bankruptcy estate. As part of these settlements, EV US and EV UK (which I’ll collectively refer to as “EV”) have between them paid the estate $26,786,503, an amount equal to 100% of the funds the entities received from FTX and the FTX Foundation (which I’ll collectively refer to as “FTX”) in 2022.

These two amounts hugely differ. My guess is this is because most of the FTX Funds were received by EV US and that wasn't included in the charity commission? But curious whether I am missing something. 

Your guess that Zach's post refers to both EV US and EV UK, whereas the charity commission only looked at EV UK is correct - and this explains the difference in amounts

Thank you!

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