Charges against BitMEX and cofounders

by Julia_Wise1 min read2nd Oct 202016 comments

44

Community
Personal Blog

You may have read recent reports that the U.S. Commodity Futures Trading Commission and Department of Justice have filed charges (announcements here and here) against the cryptocurrency exchange BitMEX and several people involved with the company. This includes Ben Delo, a major EA donor and a cofounder of BitMEX.

CEA, Effective Giving UK, and 80,000 Hours became aware of the charges yesterday, when the news was first reported. No findings have been made about these charges at this point. We will continue to watch how things unfold and learn more, and will continue to update the EA community.

16 comments, sorted by Highlighting new comments since Today at 7:44 AM
New Comment

[Conflict disclosure: A charity on whose board I sit, the Legal Priorities Project, has been funded by Ben Delo. I write solely in my personal capacity.]

I think most EA organizations should have a very high standard for outright rejecting donors' gifts on the basis of the donors' wrongdoings. In particular, even if Ben Delo is guilty of everything he's charged with doing, I don't think EA charities should reject his donations on that basis. (I know that CEA has not yet said it would do so or recommend doing so; just proactively voicing my opinion in case that's under consideration.)

For one thing, it seems pretty antithetical to EA—and the stakes of the work we purport to engage in—to reject money on such a basis. We care about doing good effectively, and more money is useful to doing that. We should be very reluctant to give up free money, especially if the counterfactual is the money is spent less effectively or selfishly. If, as we often suppose, it costs about $3,000 to save a life through GiveWell, it seems very implausible to me that whatever good comes from rejecting a donation of that size must be vastly outweighed by the good that can be accomplished by those donations. Indeed, it's not clear to me that EA even has a legitimate inherent interest in this caring about a donor's identity at all, without anything more.

I also think a standard of rejecting people on the basis of their wrongdoings is morally suspect. I really think we should avoid judging people on the basis of the worse thing they've done, even if that worst thing is criminal. Furthermore, as most people would probably agree, legality and criminality are imperfect indicators of morality, and so making donor-relations decisions on that basis seems slippery without more. This is especially true for malum prohibitum crimes.

Furthermore, even criminals or overall-bad-people should be allowed—and encouraged!—to engage in morally good actions, including donating to effective charities. It's very unclear to me what good can come of a blanket policy against rejecting donations from such individuals, and it risks depriving them of the opportunity to do good things, including as acts of penance or out of a genuine desire for moral growth.

Relatedly, EAs are often appropriately more risk-tolerant than others. Legal risk is one important type of risk; I don't see it as categorically different from other risks. I recall Tara Mac Aulay's 80K interview, where she noted:

When we’ve tried to outsource some of these [administrative] things, people from a more traditional non-EA background will be overly focused on professionalism or making sure that you fully comply with all of the legal restrictions whereas the approach that we tend to take is more to try and look at what are the costs of non compliance and what bad things actually happen if we don’t tick every box on some government checklist and then figure out how much time and effort we should spend on these things versus all of the other priorities in the organization. And I think that’s something that’s really hard to do without this kind of context in EA culture.

I don't think we want to encourage a culture in which EAs stridently minimize all legal risks, because that can impede effectiveness! While we (and major EA organizations) may want to refrain from encouraging such risky behavior, I don't think assumption of such risks in pursuit of the greater good should be grounds for total rejection of donations (just as it wouldn't be for other forms of risk). We don't want to do shun would-be Robin Hoods.

I do see a few reasons why a charity might reasonably worry about things like this:

  1. PR risks.
  2. Worrying about effects on the charity's incentives or culture.
  3. Worrying about whitewashing the donor's past deeds.
  4. Worrying about accepting "blood money."
  5. Worrying about the transaction being voided as a fraudulent transfer/voidable transaction

(1) is of course a legitimate worry, but I think EAs rightfully don't weigh PR as highly as other charities/movements, especially when the PR concerns are not founded in good moral reasoning. If we think that accepting donations from people convicted of crimes is better for the world, I may prefer us to stand by our convictions. Regardless, anonymization can obviously mitigate some (most?) of these risks.

(2) is also a very legitimate worry, but it seems like it should be solvable through either anonymizing donations or having an ethical firewall between those who know major donors' identities and those who set organizational priorities. For people who have engaged in violent or otherwise-repugnant behavior (such that employees/volunteers/others have good reason to want to not be around them), then simply excluding the donor (and even their name and likeness) from spaces should be sufficient.

(3) is a bit more complex, but would also be solved with anonymization. I'm actually not sure that the worry is a well-founded one, since it seems like a person's good acts are morally relevant to assessing that person's overall goodness in light of bad acts. But if we don't want to be complicit in that process, then precluding attribution should solve the problem.

I'm not sure I have a good working theory of how to deal with (4), other than to say I think it would be perfectly reasonable for any charity to assume that any anonymous donation was not the fruits of some heinous crime (as is almost always true). Furthermore, even if it was, it's not clear to me what good for the world is accomplished by precluding a person who is by supposition bad from getting rid of her money: bad people should probably have less money, not more.

I'm not an expert on (5), so maybe that's what's driving this.

Thus, in all cases except (5), anonymization would seem to do a good job of protecting charities' legitimate interests while also allowing for more donations to go through. CEA's efforts to deanonymize donor identity are therefore a bit puzzling to me. Unless (4) and (5) are doing a lot of lifting, I'm not sure I see the reasons for CEA's worries in this particular case or any cases in the same ballpark.

Justifying potentially bad stuff with "the stakes of the work EA does" feels like a slippery slope and a bit fanatic.  There should be principled reasons that holds true for all charities, the cost-benefit approach you use the second part of your comment is better. Related: this thread on whether it's okay to work in the Tobacco industry.

Some other reasons I am uncomfortable with rejecting donations on such a basis:

  • It seems inconsistent with the less-punitive approach to crime that EA orgs like Open Phil are supporting
  • I don't think what Delo did, even assuming he is guilty, is morally worse than many behaviors that are (properly) tolerated among EAs, like a lifetime of eating factory-farmed meat

As an addendum of2) and  4), FWIW, on the object-level I'm not particularly convinced that Ben Delo has acted particularly immorally (though I have not looked in detail at the allegations). 

If we were to conflate morality with legality, we would also believe that eg anti-animal agriculture activists are evil terrorists, and that open science is similarly evil. Moreover, since there is not a particularly strong principled reason to privilege US/UK law as moral guidance over the laws of other countries, we should take seriously the possibility that we should revise our views based on the legal doctrines of other countries, which may have some counter-intuitive results.

Strongly agree. It’s what I was getting at with the malum prohibitum thing.

(3) is a bit more complex, but would also be solved with anonymization.

Anonymization would probably solve (3), but would, unfortunately, likely create PR risks of its own. Lawrence Lessig made a similar argument a while ago:

Everyone seems to treat it as if the anonymity and secrecy around Epstein’s gift are a measure of some kind of moral failing. I see it as exactly the opposite. IF you are going to take type 3 money, then you should only take it anonymously.

Unfortunately, from what I can remember, public response to this argument was overwhelmingly negative, and The New York times (yes, that newspaper) published a story whose headline portrayed Lessig in a very bad light (Lessig subsequently filed a defamation lawsuit against the Times, which he withdrew after the headline was amended four months later). I personally would not have anticipated such a response, since the argument seems pretty reasonable to me, and I wonder if EAs as a whole may be apt to underestimate certain PR risks simply because they rely on their own subjective sense of the merits of the relevant arguments to predict how the broader public and the media will react to them.

Yeah, this is a good point. But this is why I limited my position to setting "a very high standard" for rejecting donations (and not rejecting cases from people "in the same ballpark" as Delo, assuming he is guilty, which we should not) and not "never."

Also, I think there are some salient differences with the Epstein case, beyond the enormous gulf in moral turpitude implicated by the cases. Ito knew about Epstein's identity, and IIRC Epstein had toured the Media Lab. A truly anonymized system should allow for neither of these.

(I also thought the Lessig article was perfectly reasonable.)

My very quick take:

  • I think you make a couple of good points, and overall I updated a fair bit into the direction of "accepting functionally anonymous donations is ~always OK, even if you know the money has morally questionable origin".
  • I'm still not fully convinced, and suspect there are realistic cases where at least initially I'd be fairly strongly opposed to taking such donations.
  • I'm not sure if I can fully justify my intuition / if the things I'm going to say are actually its main drivers, but at first glance I see two reasons to be hesitant:
    • I'd guess that in practice it can be very hard to implement the level of anonymity you suggest. E.g. relationships to large donors in practice are often handled by senior staff who do have influence over the org's strategic direction.
      • This is partly due to common (actual or perceived) donor preferences.
      • But it also makes sense from the org's perspective: e.g. knowing the details about the relationships to large donors is fairly relevant when doing risk management. But for a holistic risk management you also need to look at other information that's quite dispersed throughout the org; certainly org leadership needs to be involved. So the org has an incentive that might preclude setting up the kind of "firewalls" you advocate - and when they are in place, there will be incentives to subvert them, which seems like a bad/risky setup.
    • I think that outside perceptions are a quite significant obstacle, for reasons that go beyond "PR risks" in a narrow sense. My sense is that the stakes in the arena of "moral/political signaling" are quite high for many actors, in particular if you rely a lot on informal cooperation based on perceptions of hard-to-verify shared interests. And whom you take money from will often be quite significant in that arena.
      • One issue here is that the level of anonymization / protection from adverse incentives you advocate will often be hard to verify from the outside.
        • If I know that charity X has received a substantial donation from Y, my prior will be that Y has significant influence over X. In typical cases, it would be quite costly (in terms of time, but potentially also inside/sensitive information that would need to be shared) to convince me that this is not the case.
      • Another significant issue is a kind of "contagion" due to higher-order social reasoning: Suppose I know that charity X has received a substantial donation from Y. Suppose further that I know that X's relationship to Z is relevant for X's ability to achieve its mission (think e.g. X = MyAISafetyOrg, Z = DeepMind). Even if I'm personally not that concerned about accepting donations from Y, I might still be concerned that X made a bad move if I think that Z would disapprove of getting funded by Y. "Bad move" here might refer to a narrow sense of competence, but also again to "moral"/influence issues: if it seems to me that X is willing to accept the cost that most others are going to worry if Y has influence over X, this makes it seem more likely that Y in fact has influence over X.
      • Consider also that if it would be costly for X to publicly acknowledge it accepted a donation from Y, then in virtue of this very fact accepting an anonymous donation from Y gives Y influence/leverage over X (because Y can threaten to disclose their donation).
      • My impression is that related concepts like "virtue signalling" are often discussed in a derogatory fashion in the EA sphere. I'd like to therefore add that when I said "moral/political signalling" I'm not thinking of arguably excessive/pathological cases from, say, highly public party politics as central examples. I'm more thinking of the reasons why "integrity" (and, for philosophers, Strawsonian "reactive attitudes") is a thing / an everyday concept, and of credibility/"improving one's bargaining position".
        • (Similarly, note that "follow the money" is a common heuristics.)

Following up on this: I had a conversation that updated me to believe that CEA is doing the right thing here. Unfortunately I can't disclose much about that conversation, but I am posting this here for accountability.

Someone pointed out to me that money laundering prevention due diligence could be another reason, especially for conditional grants or organizations like CEA that regrant.

Here’s an update from CEA's operations team, which has been working on updating our practices for handling donations. This also applies to other organizations that are legally within CEA (80,000 Hours, Giving What We Can, Forethought Foundation, and EA Funds).

  • “We are working with our lawyers to devise and implement an overarching policy for due diligence on all of our donors and donations going forward.
  • We've engaged a third party who now conducts KYC (know your client) due diligence research on all major donors (>$20K a year).
  • We have established a working relationship with TRM labs who conduct compliance and back-tracing for all crypto donations.” 

Is the idea that such controls, had they been implemented in the past, would have prevented you from accepting Delo's donations? 

Also, I am curious to see CEA's cost-benefit analysis behind this decision. Naively this seems like incurring a cost (staff time, consultant fees, lawyer fees, annoy donors) in order to reduce a benefit (donations). Based on my cursory research (talking to a lawyer and reading this) I couldn't work out if this was actually legally required given CEA's situation, though it does seem to be reasonably common.

I am checking with operations staff about this.

I don’t want this comment to read as all commentary on Delo or BitMEX specifically; we're also thinking about how to be prepared for other situations that could arise. [Edited for clarity]

A lot of what’s happening here is CEA realizing that there are a lot of potential donors who make money in crypto or other emerging fields where society is still trying to figure out how to apply legal and ethical frameworks. We need better systems for thinking about that. Many of the steps CEA is taking or considering are not strictly legally required, but that’s not our only consideration.

EA has long included the idea that some ways of making money could create net negative impact even if you donate your earnings, for example 80,000 Hours’ post on Why you should avoid harmful jobs even if you’ll do more good.

There are other ways of making money that don’t reach that bar, but that involve enough harm that their overall effect could be really damaging to EA, for example by spreading a norm that it doesn’t really matter whether you make your money in an ethical way as long as you donate it afterwards. 

CEA’s guiding principles include this section on integrity:

Because we believe that trust, cooperation, and accurate information are essential to doing good, we strive to be honest and trustworthy. More broadly, we strive to follow those rules of good conduct that allow communities (and the people within them) to thrive. We also value the reputation of effective altruism, and recognize that our actions reflect on it.

I don’t want this all to read as commentary on Delo or BitMEX specifically. 

Well you did announce the policy change as a comment on an article about Delo!

 

EA has long included the idea that some ways of making money could create net negative impact even if you donate your earnings, for example 80,000 Hours’ post on Why you should avoid harmful jobs even if you’ll do more good.

I think (?) I may have pointed this out previously, but there are some significant issues with this article. For example, it suggests a $42,000 average social cost of jobs in finance:

We also made a rough estimate of the damage caused by jobs in the financial sector that increase the chance of a financial crisis, and found a figure of $42,000 per year.

...

First, the estimates are highly uncertain, and only apply to finance jobs on average. If you picked the most harmful jobs in finance, they could be much worse.

But if you follow the source link, you can see that this estimate is actually for only the 10% most harmful jobs:

The US financial sector employs some 6,000,000 people. I am going to guess that the share of people that are involved in activities that could predictably increase systemic financial risk is around 10%. ... 

That would suggest through financial instability each of these 600,000 people lowered other people’s income in the US by $42,000 on average, for each year they worked.

So the average harm is 10x less, i.e. $4,200.

Even then, I think this is quite a poor estimate. It relies on ascribing all the expected costs of financial crisis to financial workers. However, a huge deal of the responsibility should surely be borne by other actors. Depending on your views of the causes of the crisis, some collection of these groups are quite responsible:

  • Politicians who passed regulations like the community reinvestment act.
  • Regulators who focused on solvency over liquidity.
  • The Federal Reserve for excessively tight monetary policy.
  • Individual borrowers who knowingly mis-stated their ability to repay.
  • Investors in ABS CLOs or Prime MMFs who did not do their due diligence.
  • Academics who over-emphasised normal distributions and ignored skew/kurtosis.

Furthermore, it does not assign any monetary value to the positive aspects of finance, even though these are probably very large:

  • Banks allow people to save money without being afraid it will be stolen by burglars.
  • Credit card networks allow us to purchase things without needing to carry cash.
  • Paypal allows us to buy things from merchants who are not physically nearby.
  • The stock market provides signals to investors about where would be useful to invest their money.
  • Companies can raise money in order to grow much more quickly than they would otherwise.
  • The bond market allows governments to borrow money to finance additional spending during recessions and pandemics.
  • (etc.)

Similarly, the article suggests that being a Tobacco CEO is unacceptable, linking to this analysis. However, I think the fermi calculation involved in this estimate was quite far off, as I explained here:

However, I think that while 80,000 Hours substantially improved on the analysis in the original paper, they omit a number of factors. Unfortunately, almost all of these factors seem to pull in the same direction, causing them to over-estimate the amount of harm done by a tobacco CEO. These include both over-estimating the direct harm done and under-estimating the benefits donating your income would cause.

At the time  Rob suggested he would think more on the issue, but to my knowledge the analysis was never updated.

Well you did announce the policy change as a comment on an article about Delo!

Sorry, I mean my most recent comment specifically - the reasons we're considering these kinds of changes are not just because of this one situation but also because of others that could arise. I'll edit to clarify.