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Edited to add: I've posted a clarifying remark in the comments section here

As Open Phil’s managing counsel, and as a member of the EA community, I’ve received an onslaught of questions relating to the FTX fiasco in the last few days. Unfortunately, I’ve been unable to answer most of them either because I don’t have the relevant legal expertise, or because I can’t provide legal advice to non-clients (and Open Philanthropy is my only client in this situation), or because the facts I’d need to answer the questions just aren’t available yet. 

The biggest topic of concern is something along the lines of: if I received FTX-related[1] grant money, what am I supposed to do? Will it be clawed back? This post aims to provide legal context on this topic; it doesn’t address ethical or other practical perspectives on the topic.

Before diving into that, I want to offer this context: this is the first few days of what is going to be a multi-year legal process. It will be drawn out and tedious. We cannot will the information we want into existence, so we can’t be as strategic as we’d like. 

But there’s an upside to that. Emotions are high and many people are probably not in a great mental place to make big decisions. This externally-imposed waiting period can be put to good use as a time to process

I understand that for some people who received FTX-related grant money, waiting doesn’t feel like an option; people need to know whether they can pay rent, or if their organization still exists. I hope some of the information below will provide a little more context for individual situations and decisions. [2]

I also committed to putting out an explainer on clawbacks. That is here, though I think the information in this post is more useful.  

Bankruptcy and Clawbacks 


The information in this section is based on publicly available information and general conversations with bankruptcy lawyers. I do not have access to any nonpublic information about this case. None of this should be taken as legal advice to you.

FTX filed for bankruptcy on Friday (November 11th, 2022). More specifically, Alameda Research Ltd. filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code, by filing a standard form in the United States Bankruptcy Court for the District of Delaware. The filing includes 134 “debtor entities” (listed as Annex I); it looks like this covers the full FTX corporate group.

This means that the full FTX group is now under the protection of the bankruptcy court, and over the coming months, all of the assets in the debtor group will be administered for the benefit of FTX’s creditors. By filing under Chapter 11 (instead of Chapter 7), FTX has preserved the option of emerging out of the bankruptcy proceeding and continuing to operate in some capacity. You can read a useful explainer on the bankruptcy process here

The rules in the Bankruptcy Code are ultimately trying to ensure a fair outcome for creditors. This includes capturing certain payment transactions that occurred in the past. Basically, the debtor can reach back in time to undo deals it made and recoup monies it paid; this money comes back into the estate through clawbacks and gets redistributed to creditors according to the bankruptcy rules. 


There are two main types of clawback processes. The first and most common (called a “preference claim”) target transactions that happened in the 90 days prior to the bankruptcy filing. Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back. It’s almost impossible to say right now whether any specific grant or contract will be subject to clawback – there just isn’t enough information on the court docket – and if your transaction is captured, you will eventually receive formal notice from the bankruptcy court and will have an opportunity to raise a defense, negotiate a settlement, or litigate. You can read a legal explainer about preference claims here

The second clawback process (called a “fraudulent conveyance claim”) targets transactions that happened up to two years prior to the bankruptcy filing. The root of these claims is an allegation that the debtor moved assets out of their organization for the purpose of frustrating future creditor claims. These types of claims are more complicated to prove, less commonly brought, and more individualized to the specific transaction. 

It is way too early to tell whether and how fraudulent conveyance claims might be used in the FTX bankruptcy proceeding. But they would tend to target larger transactions or transfers that seem irregular, even if the recipient (e.g., grantees receiving funds) did nothing wrong and had no knowledge of any impropriety. Again, if your transaction is captured in a fraudulent conveyance claim (essentially if you last received money from an FTX entity more than 90 days ago), you will receive formal notice and have an opportunity to make your own case. I don’t currently have a good explainer for fraudulent conveyances, but the topic is somewhat covered in the explainer our external counsel helped put together, which is here

Being a Creditor

Finally, to the extent you have a binding agreement entitling you to receive funds, you may qualify as an unsecured creditor in the bankruptcy action. This means that you could have a claim for payment against the debtor’s estate. If you are listed as a potential creditor, you’ll receive official notice from the court about the process for getting your claim on file; even if you don’t receive notice, if you think you have a claim, you will be able to file one proactively. It’s not at all clear whether there will be any assets left over for unsecured creditors, especially ones that are not depositors on the exchanges.  


I want to emphasize that this process is likely to take months to unfold. I expect that FTX will file more documents with the court in the coming days; those documents should include at least a partial list of assets, debts, and potential creditors (including those captured in the lookback periods). Many court filings are publicly accessible, and you can look them all up yourself as they are disclosed on the court’s docket, but I will try to make the more substantive or useful filings available for you. I will update with a link when the folder is ready. 

Looking Forward

I intend to share thoughts on another big area of concern - communications with FTX and FTXF-related people, and document preservation, in a future post. 

For further resources surrounding bankruptcy proceedings and clawbacks: 

I’ll do my best to provide updates as more relevant information is disclosed, and to maintain a current database of the most useful filings in the bankruptcy action here

As major developments unfold in the bankruptcy case, I currently plan to provide general updates to the community via the EA Forum. As part of that effort, I also plan to share explainers prepared by bankruptcy lawyers and other experts. This is a large, complex case and there will be a lot of people watching, reporting and giving takes, which I will aim to share.

Finally, I am working to organize additional legal support options for the FTX grant recipient individuals and organizations that are most impacted as they navigate this process.  


  1. ^

     I say FTX-related and not FTXF because my impression is that grant money came from many different entities, and not just FTX Foundation.

  2. ^

    In case this is helpful additional information: my husband is an FTXF grantee who received his money more than 90 days ago, and we’ve personally decided to halt committing any more of that money for now, though that has very little impact on our personal financial situation so is not a hard decision. 

Sorted by Click to highlight new comments since:

The first and most common (called a “preference claim”) target transactions that happened in the 90 days prior to the bankruptcy filing. Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back.

"probably" sounds like >50% probability.  I talked to some lawyers and my (possibly incorrect) notes from that call say that preference claims are "very unlikely" to apply to Future Fund grantees (suggesting <10%). I don't know why they believe this; it's possible I misunderstood them; they also flagged that everything is very uncertain.

Everything is uncertain, but I think Molly may have chosen her words carefully here: attorneys representing the bankruptcy estate "will probably ask you" to repay. Sending a demand letter is cheap; it would probably be professionally irresponsible for debtor's counsel not to send those letters if they thought doing so would be net positive EV for the estate.  I don't know if Molly was intending to state a probability that the preference actions would succeed.

I can't speak for the lawyers you heard either, but I feel we really don't know enough to generate an estimate with any amount of confidence. But here are some reasons one might assign a lower probability:

  • You believe the grantees can establish that they provided "new value" that meets the statute's requirements in exchange for the transfer [11 USC 547(c)(1)]
  • You believe the grantees can establish that the transactions were  incurred and made  in the "ordinary course of  . . . financial affairs of the debtor" [11 USC 547(c)(2)]
  • You believe the grantees can overcome the presumption that the debtor was insolvent at the time of transfer [11 USC 547(b)(3), (f)].
  • [Edit to add] You think the grantee can only be reached under 11 USC 550(a)(2) as the "immediate or mediate transferee of [an] initial transferee," and the grantee can meet the requirements of the (b)(1) defense as someone who received the transfer "for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided."
  • [why can't I end bullets?] Part of the reason for the uncertainty is that we don't know when FTX started running into trouble. If everything in FTXland was fine until a week ago when Alameda incurred a huge loss, then those "ordinary course" and "not insolvent" arguments look stronger to me. If FTX was in serious trouble at the time the transfers were made and/or there was an existentially risky amount of shady stuff going on, those arguments are harder to make.
  • Concepts like "new value" -- as well as how bankruptcy law generally deals with partially-executed contracts -- are vaguely behind my suggestions in this forum that there may be a difference between pre- and post-insolvency expenditures on a grant. In particular, new value must be "in fact a substantially contemporaneous exchange." That's  . . . vague, but it tells me that you're not likely to shoehorn a multiyear grant into the new value defense.
  • None of this is to provide anyone with legal advice -- it is merely to explain why you should be cautious in evaluating comments by anyone who is too confident about the final outcome for grantees in general at this stage. Molly's post does a good job not being too confident, while I am skeptical of anyone who says "less than 10% chance" unless they provide the reasoning and supporting caselaw research to back up that claim.

I'm a little skeptical of the "new value" point. The rationale behind the exception is that, "because new value is given, a contemporaneous exchange does not diminish the debtor's estate." In re JWJ Contracting Co., Inc., 371 F.3d 1079, 1081 (9th Cir. 2004). A grantee might provide value in a philanthropic sense, by doing charitable work, but that work wouldn't restore the financial value to FTX, which is what the bankruptcy court cares about.

(This is not legal advice; I am not a lawyer; I very much agree with Jason's caution against overconfidence in either direction.)

Yes, that's definitely a drawback of that theory. The potential argument for would be that we ordinarily employ some degree of presumtpion that the business decisions of a corporation are rational (e.g., the "business judgment rule"), and that principle might justify starting with some belief that the transaction generated something of value for the corporation. Cynically: enhancement of its reputation.

Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back. 


I received a travel grant from the FTX regranting program after August 11. Does this mean I will likely have to pay this money back, or does this depend on when the FTX Future Fund itself received the money from FTX? 

I think that the "FTX Future Fund" is not even a real legal entity.
Correct me if I'm wrong.

You're wrong on this.

FTX Foundation is a legal entity, EIN 88-0669152 , incorporated in Delaware. Per a lawyer's letter, it is a "501(c)(3) organization that has applied for recognition as a public charity with the United States Internal Revenue Service (IRS)"

My grant agreement and the bank transfer both mention "FTX Philanthropy, Inc."

This is not legal advice and I am not a lawyer and this may be entirely wrong, but it may be helpful to know that to the best of my current understanding FTX Philanthropy Inc is not one of the currently bankrupt entities.

I don't think this matters FYI -- all funds came directly or indirectly from a bankrupt entity or person

This is not legal advice and I am not a lawyer and this may be entirely wrong, but it may be helpful to know that to the best of my current understanding I have not seen any evidence of a double entity clawback occurring before, of the kind that would be involved if grants were clawed back from FTX Philanthropy grantees despite FTX Philanthropy not being bankrupt. And I have been looking.

Section 550 allows you to go after subsequent transferees in some cases, although the rules are stricter than for initial transferees.

Look at this, from a major US law firm: https://www.jonesday.com/en/insights/2021/11/case-update-second-circuit-breathes-new-life-into-madoff-trustees-efforts-to-recover-ponzi-scheme-payments

You'll see there is a defense -- the estate cannot go after a subsequent transferee "that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided." There is a different rule if the subsequent transferee gave partial, but not, value. 

How to apply these principles in the charitable context is not obvious. However, if someone gets a transfer, and then they pay me for past or present legal services at market rate, then the bankrupt debtor can't go after me. Likewise, I think it would be very very hard to go after any supplier or employee of a grantee because they provided value (supplies or labor) to the previous transferee in exchange for payment.

As Jason noted, this definitely happens and is allowed, see 11 U.S.C. 550(a)(2).  Some cases where this has happened are In re Laines, 352 B.R. 397 (Bankr. E.D. Va. 2005); In re Lindley, 121 B.R. 81 (Bankr. N.D. Okla. 1990); In re Crabtree, 49 B.R. 806 (Bankr. E.D. Tenn. 1985).

I think you're right that "FTX Philantrophy" was  acting as a regrantor of FTX funds, and that doesn't protect its grantees. However, the fact that FTX Philantrophy isn't in the bankruptcy filing could be relevant. It might mean that the 90-day clock started when an entity in the bankruptcy transferred funds to FTX Philantrophy.  I am unclear on whether a court would see FTX Philantrophy as an insider for purposes of 11 USC 547.

More generally, the exact origin/flow of funds could potentially be a total defense in some cases. For instance, the Future Fund announcement hinted that some funds might come through a FTX employee's DAF. Payments to an employee for services rendered are often not recoverable in a preference action for several different reasons. And AFAIK no FTX employee has filed for bankruptcy. So hypothetically, if the chain were FTX -> employee -> DAF -> EA grantee, the FTX -> employee transfer might not be subject to clawback, which would render the EA grantee safe.

Was the entity that wrote you the grant in the debtor group?  That list is here, though note that reportedly it has some errors already.   If it is, then it will depend on when that entity transferred the grant to you.  If it is not, it gets very complicated and basically I'm not sure.

I will say - and this is absolutely not legal advice, etc., etc. - just because they can ask you to return the money doesn't mean they will.  If it was a trivial amount, it would be quite surprising.  Different bankruptcy lawyers have different approaches to something like this, though.

There seems to be some confusion around the following sentence: “Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back.” 

Some clarifications: 

FTX Foundation, Inc. (the nonprofit corporation) is not currently in the debtor group. At least some FTXFF grantees received their funding from this nonprofit corporation, so this sentence doesn’t apply to them (yet – it could be added later).

It’s worth checking what entity you received your funding from. We believe that some grantees received funding from Alameda Research, North Dimension or other entities that are in the debtor group.

When I say “the bankruptcy process will probably ask you, at some point, to pay all or part of that money back” I mean, you are at least likely to receive a demand letter from the lawyers representing the debtor group. It costs next to nothing for the lawyers to send out demand letters, so a small grant amount isn’t necessarily protective against receiving a letter like that.  

If you do receive a demand letter, at that point you will have options about whether and how to engage in a negotiation process with the debtors’ lawyers. If you don’t come to a resolution, the claim could go to formal litigation. The likelihood of this depends on a number of factors, including the amount of money at play. Keep in mind, this is probably years in the future; a lot can happen in the bankruptcy case (and in the world) between now and then. 

I saw this in a Financial Times article about FTX today:

'[L]egal experts argue that even if these funds were proven to be linked to wrongdoing, there probably would be no legal basis for clawbacks. James Cox, professor of corporate and securities law at Duke University, said this was due to the “bona fide” principle, which protects individuals who accept money with no knowledge it derives from illicit activity.' https://www.ft.com/content/428c7800-c72d-4c59-9940-4376fea6e263 (paywalled)

Any thoughts on this?

Not enough context from that snippet, but be cautious about relying on anything not written with grantees specifically in mind.

The article is mainly about SBF's political donations - here's a paywall-free link: https://archive.ph/8FX5V

Thanks! It's still difficult to assess -- my guess is that the professors provided a more nuanced 5-10 minute discussion including rationale and sources of uncertainty, and then FT compressed that into a bottom-line conclusion and a fragment of analysis. It is a very lossy compression to me; i.e., I cannot extract much of what the professors said (or were thinking). That isn't a criticism of FT, as its purpose was not to provide information for recipients (much less legal advice for them).

Without the ability to undo FT's compression, we can't discern whether the professors were giving a quick take or had conducted a detailed analysis. We also can't discern the extent to which the professors' answer might apply to different circumstances.

For example, one possible factual distinction lies in the nature of US political organizations. In many cases, "Jones for Congress" is never intended to have life after the election and is often in the red at that point. If Jones runs again, they can create a new organization: "People for Jones" or something.  In that scenario, whether "Jones for Congress" is subject to clawback is pretty much irrelevant because there is nothing to claw back. And clawing back from employees, electric companies, vendors, etc. who provided value to "Jones for Congress" without knowledge of the potential clawback is going to be very difficult under section 550.

I'm not suggesting that was the professors' rationale. I'm only noting it as an example of a rationale that could justify the statements printed by FT but would not lead to the conclusion that grantee organizations more generally are immune from clawback.

I just wanted to say I think your comments responding to a lot of the questions about the legal fallout are very helpful.  They balance emphasizing the uncertainty of the situation with being informative very well.

Hi, thanks for writing this!

A few questions that I think are important:

  1. Is the Future Fund a separate entity from those who filed for bankruptcy? If it is, will it be the Future Fund itself that is asked to return money, or the people it further gave grants to?

  2. What happens with people who received grants outside the US? [Edit: answered in linked doc, as Aleks pointed out]

IANAL, but...

  1. The FTX Foundation is a legal separate entity, but not all the grants were paid out from the foundation. I have no idea how many steps the clawbacks can go through, and given the relationship between FTX and the foundation, I imagine this is at least a question.
  2. It's harder for the creditors to sue from the US, but they can, and depending on the amounts they likely will - individuals who got small grants in foreign countries are probably at somewhat less risk.

    For those who got paid by a different legal entity, here is the bankruptcy filing, which lists the entities: https://s.wsj.net/public/resources/documents/alameda-filing-11112022.pdf

Just noting that the second question is addressed in the document they created.

Thanks, I now read it. I understand it somewhat better but have no idea what to expect in practice.

Re: 1, the Future Fund was a collection of various entities, grants were distributed from a variety of different entities.  Some came from FTX Foundation Inc.  It did not file for bankruptcy.  Assuming 1) the entity that wrote the grant did not file for bankruptcy, but 2) the money ultimately came from a now bankrupt entity, grantees may still be asked to return money.  This is because under 11 U.S.C.A. § 550(a)(2), the bankruptcy trustee can recover the transferred property - here, money in the form of a grant - from subsequent transferees of the initial transferee (i.e., the entity that wrote the grant), and the grantee would be a subsequent transferee.  

There are many, many factors that will determine whether they will actually ask the grantee to return the money, including the cultural practices of the law firms who end up on this case.  So I don't mean to suggest one way or the other whether this is likely to happen, just that the fact the grantmaking entity itself is not bankrupt would not insulate the grantee from potential clawback if the money ultimately came from an entity that has filed for bankruptcy, which almost all FTX business entities have.

From the linked document on clawbacks

What about non-US recipients?

The debtor could bring an avoidance action in the US against a non-US recipient. The recipient would then have to decide whether to litigate in the US.  It could file a motion that the bankruptcy court lacks personal jurisdiction over it. The debtor could then seek to seize its assets if it had any in the US, or haul into court in US if has a hook for jurisdiction, or if it had no assets in the US/ no jurisdiction, then there would be a question of whether the foreign court would let the debtor pursue the default judgment in that court. This takes substantial legal resources, so would only be worth it for larger sums.


Are you able to give a sense of what you mean by larger sums? $50k? $100k? $1m?

Thanks so much, Molly, I really appreciate you taking the time to write this, as I'm sure many others here do as well!

There is one thing that really confuses me about what you've written (that I think could be relevant to quite a number of folks here) that I'm hoping you can clarify. It's related to what "FTX entities" we are talking about precisely here. 

Some -  perhaps many - of the grants seem to have been paid through an entity that it's not clear to me is legally/formally related to the other entities you're referring to here. And I'm wondering if that could change the situation.

My basic question is: is your post still relevant for grants that came from entities that are not part of the group of companies filing for bankruptcy? 

And is your post still relevant for funds given by an FTX company to a 501(c)(3), and then the grants were later made from that 501(c)(3) to other grant recipients?


Below are more details about what I'm referring to.

You said that post is about the question:

"if I received FTX-related grant money, what am I supposed to do?" (with the footnote: I say FTX-related and not FTXF because my impression is that grant money came from many different entities, and not just FTX Foundation.)


"FTX filed for bankruptcy on Friday (November 11th, 2022). More specifically, Alameda Research Ltd. filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code, by filing a standard form in the United States Bankruptcy Court for the District of Delaware. The filing includes 134 “debtor entities” (listed as Annex I); it looks like this covers the full FTX corporate group."

and also:

"Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back."

What confuses me about this is the definition of FTX entities. While payments for different grants came from different entities, there was one entity, in particular, that seems to have made quite a number of  grants I think:

FTX Foundation, Inc.

I see no mention of this entity in the Alameda bankruptcy documents: (https://s.wsj.net/public/resources/documents/alameda-filing-11112022.pdf)

What's more, this diagram that has been floating around of their corporate structure (https://i.imgur.com/sUb2efI.png) shows FTX Foundation Inc. (at the bottom of the chart) as being unconnected to the other entities.

The FTX Foundation Inc. seems to have Delaware file number  6586501, which, when I search for it in the Delaware corporate database (https://icis.corp.delaware.gov/eCorp/EntitySearch/NameSearch.aspx) with a different name -  FTX PHILANTHROPY, INC. - but this entity is also not in the bankruptcy filing from what I can tell, and I think not on the corporate structure chart mentioned above either.

So, what is  FTX Foundation Inc.? Here (https://forum.effectivealtruism.org/posts/2mx6xrDrwiEKzfgks/announcing-the-future-fund-1?commentId=qtJ7KviYxWiZPubtY), one of the people running the Future Fund says:

"We have a number of entities we can use to provide funding, and which we use depends on the exact circumstances. It could be our non-profit entity FTX Foundation Inc, or it could be a DAF [Donor Advised Fund] of one of our board members, or it could be something else if it's a for-profit investment. "

This article (https://puck.news/the-s-b-f-pandemic/) also referred to this org as a 501(c)(3):

"That financial question also hovers over the future of the FTX Future Fund, the flagship foundation created by S.B.F. and other top executives at the company that promised to give away hundreds of millions of dollars annually and has already distributed $160 million this past year. But it’s not clear that all of the assets there are segregated for charity—this particular philanthropy is actually a collection of vehicles: a 501(c)3 foundation called FTX Foundation Inc. and several donor-advised funds of its board members, along with other, undisclosed vehicles if the Future Fund wants to back a for-profit company."


Thanks again for all your help!

I'm not Molly and I'm sure she'd know better than I, but I'm pretty confident that part of this post only applies to grantees who received their grant from one of the FTX entities that is now bankrupt - this is what she means by "the debtor group."

Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back.

I'm not a bankruptcy lawyer, and I know how frustrating of an answer this is, but if the grant came from a non-debtor entity like FTX Foundation Inc., I think it's very unclear what's going to happen because a lot depends on information we don't know yet.  The exact sources and timing of any transfers to FTX Foundation may matter.  The fact that the corporate form was, clearly, not respected within FTX complicates things further.  But the fact that FTX Foundation Inc. was not bankrupt would not by itself confer immunity from the possibility of clawback.  That's 11 U.S.C. 550(a)(2).

Note I don't see any results for FTX Foundation or FTX Philanthropy at https://apps.irs.gov/app/eos/determinationLettersSearch So it's possible it's not a 501(c)(3) (although it could still be a non-profit corporation).

I've noticed that it takes new orgs up to a year to show up in that search, so it might also be that they've applied for or gotten the status recently (given that FTX stuff was so new). Delaware corporation search suggests they are registered as a nonprofit corporation in Delaware - https://icis.corp.delaware.gov/ecorp/entitysearch/NameSearch.aspx, (have to search them by name). 

Damian Williams, the United States Attorney for the Southern District of New York, said the following today:

To any person, entity or political campaign that has received stolen customer money, we ask that you work with us to return that money to the innocent victims.

I know almost nothing about law, so it's unclear to me what this means, but it seems relevant to the topic of this post (and to EA in general), so I'm commenting this here in hopes that someone with more knowledge can shed some light. 

Thank you so much for the explanations!

Is the correct cut-off date Aug. 11 (Nov. 11 - 3 months) or August 13 (Nov. 11 - 90 days)?

And is the trade date or the value date important here? Or the date of the signing of the contract?

Edit: This document (h/t David Manheim above), or some sections anyway, are dated Nov. 10, not 11. Is that maybe the important date?

The date would be Nov. 11, and I'm pretty confident it's 90 days, see 11 U.S.C. 547(b)(4), but Molly can correct me.  I think Aug. 11 may be a typo.

A comment on the economic & political context of possible FTX clawbacks:

Molly, thanks very much for this; it's clear and helpful. I imagine that many EAs who received any money, directly or indirectly, from an FTX-related organizations or people, are feeling very stressed, angry, and/or depressed about this clawback issue.

I imagine that if clawbacks become an issue in the FTX-et-al bankruptcy, that there would be a wide range of organizations and people affected, in dozens of countries, who have provided all kinds of goods and services to FTX since Aug 11. This could include not just EA organizations, but FTX employees who received salary and benefits, contractors and subcontractors, landlords, utilities providers, lawyers, consultants, web hosting companies, tech support people, caterers, travel agents, airlines, ad agencies,  and everybody else who was necessary to run the FTX companies everywhere that they operated. It seems likely to take a very long time (several months to years) to untangle all of those financial relationships.

In that context, some EA organizations might look like moderately big recipients of FTX funds -- or might look like relatively small potatoes. Hard to know at this point.

Also, could potential targets for clawbacks include politicians and PACs who received SBF's campaign contributions? SBF and FTX colleagues seem to have donated about $69 million for the midterm elections (mostly to Democrats). I have no idea if political campaign contributions are immune to bankruptcy clawbacks. But if they're not immune, I predict there would be a big partisan fight over that issue, with a (probably) Republican-controlled Congress calling for hearings about SBF's political contributions, and a (possibly) Democrat-controlled Senate trying to fight to avoid campaign contribution clawbacks. Such a fight could turn very nasty very quickly -- and EA would probably look like a minor sideshow in comparison.

Epistemic status: I'm not a lawyer, know almost nothing about bankruptcy law, hadn't heard of clawbacks until yesterday, and have very low confidence in most of what I'm talking about here. I'm just trying to raise some questions others (such as Molly) might be better able to answer.

The decisions about clawbacks will occur in bankruptcy court. Legislation that has an effect on  pending court litigation in this manner is uncommon (although it does happen). If the Democrats controlled both houses and retroactively passed legislation protecting political donations received from SBF, that would be a massive political gift.

Most ordinary employees, contractors, utilities providers, etc. off FTX have low exposure in my opinion because they have a stronger argument for one of the exceptions in 11 USC 547. For example, payments to the power company were pretty obviously in the ordinary course of business, and the power company provided new value around and after the transfers.

Any insider with significant criminal exposure but with enough other assets to fund a vigorous criminal defense would probably be well-advised not to fight a clawback. Trying to keep ill-gotten gains, especially from retail depositors, does not good to an Article III judge who has the power to give a convicted defendant a lifetime membership to a Club Fed non-resort. All that is to say that public clawback fights from insiders might attract less publicity than one might think.

If the estate tries to clawback from people who made withdrawals during some or all of the 90 day period, that will be a massive source of publicity. 

Jason -- thanks for this reply. Makes sense to me, with the caveat that I know virtually nothing about bankruptcy law.

PS: Folks who disagree-voted on my post here, I'm curious whether you disagree with the range of organizations that might be affected by clawbacks, or the political angle, or something else? 

I'd appreciate any specific feedback.

[on phone] Thank you so much for sharing this.

Re: "Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back."

Can I just seek a clarification? Does 'receiving money ' also apply to the withdrawal of assets that were stored on the exchange or just to grants etc? To put it another way, how probable is it that those who withdrew their legally owned assets will be asked to return them?

Can't provide legal advice, but I would generally caution against depositors relying on analysis provided with grantees in mind, and vice versa. Withdrawals by depositors raise some different questions -- e.g., I have seen at least one source question whether deposits were ever FTX's property that would ever be subject to clawbacks.


  • Are clawbacks against overseas/non-us investors likely be pursued and enforced? 
  • Are there are any relevant cases or precedents that we should look at?  

The debtor/trustee would be delerect in its duty not to pursue large clawback claims against foreign targets. Odds would depend on the grantee's exposure to the US legal system and the foreign legal system's views.

The Madoff case may be somewhat illustrative at a very broad level. Note that it was in a different judicial circuit, so exactly zero decisions are binding on the DE bankruptcy court -- even those by the court of appeals.

Essentially, if you received money from an FTX entity in the debtor group anytime on or after approximately August 11, 2022, the bankruptcy process will probably ask you, at some point, to pay all or part of that money back.

This seems important. You discuss "transactions," and when I look up bankruptcy online, it is almost all about business deals that involve an exchange of goods or services between both entities. Am I understanding you correctly that this happens the same for philanthropic donations as it does for business deals?

The relevant definitions under sections 547 and 548 have been given extremely broad interpretations. In fact, 548 has a limited protection for nonprofits in certain fraudulent conveyance matters.

I created a manifold market forecasting page for whether or not grant money given by the Future Fund via FTX Foundation, Inc. will be "clawed back". Please forecast there if you have an opinion to help others stay informed on the probabilities (and I added one I just learned about from Eliezer as well):





Are there plans from any organizations to support former FTX grantees? I'm not one of them, but know of many who received funding from the FTX regranting program, who are now suddenly without funding and might face clawbacks. 

I'd be curious to know as well, speaking as an FTX regranting program grantee.

What is the expected length of time for legal proceedings to take before anyone subject to clawbacks actually has to make a payment? This bearing in mind that the MtGox case is only just getting to the point where money is likely to be paid out to creditors almost 9 years after bankruptcy!

I'm wondering whether for practical purposes, the money might be better thought of as long term loans that have to be paid back eventually, rather than there being urgency to get it together and set it aside immediately.

Given the FTX Foundation is outside the bankruptcy group (please correct me if I'm wrong), is the relevant date here when FTX sent money to the FTX Foundation not when the FTX Foundation sent money to each organisation?

So, here are couple of not legal advice thoughts from a bankruptcy professional. 

First, we have two or more regimes at play here. The bankruptcy process, which has a variety of mechanisms for recovering funds under the bankruptcy code. The US Department of Justice's ability to recoup criminal proceeds. Finally, the possibility of claims under non-US  insolvency statutes. I'm not going to speak to the second since I have little clue of whether that will be an issue when it comes to grants - but my gut says it won't. The third is sort of speculative at the moment.

On the former, there are two main avenues for recovery. Preferences, which apply to funds transferred within 90 days prior to the bankruptcy filing, and constructive fraudulent transfers.

On preferences the transfer has to be from the debtor. So, if the entity paying the money isn't one of the companies that actually filed - there's no preference. The entity paying also needs to be insolvent when the transfer is made. This means it has to have more debts than assets. It seems quite possible that the charitable entities were solvent, even if the parent entities were not. Finally, if the transfer was made in the ordinary course of the business and according to ordinary terms, there is no clawback. This defence seems likely to apply in the context of grants, although I suppose it really depends on the details of the particular grants. I would say that successful preference claims are unlikely, although it is possible that some bankruptcy trustee or professional will decide to send everyone demand letters.

Constructive fraudulent transfers are ones made when the payor is insolvent without receiving similar value in return. Again, if the payor is not actually one of the entities in bankruptcy there is no fraudulent transfer. Also, if the payor was solvent when the grant was made, there is no fraudulent transfer. Finally, it is possible that the agreement of the grantee to use the grant money for the purposes intended is enough to satisfy the return value requirement. I'm not very sure on this last point.

Even if the companies making the grants are not in the bankruptcy yet, or were solvent, you still need to watch out for something called "substantive consolidation." This is when the bankruptcy court decides to treat some or all of the related entities as one single entity. If that happens, then these payments might be treated as coming from the bankrupt entity when it was insolvent.

Hi Warren! As far as I know, the FTX Foundation itself isn't in bankruptcy. However, because all the money came from entities who are now in bankruptcy (and were very likely insolvent at the time of transfer), my presumption is that the Foundation's grantees would be subsequent transferees for purposes of 11 USC 550(a)(2) even if there is no substantive consolidation.

Moderator Comment5

I'm temporarily locking this thread based on a request to the moderation team. Edit: now unlocked, thanks everyone for your patience.

Pasting a link (copied from Jonas Vollmer's comment in another thread) so that anyone who reads this thread  can see more recent analysis by lawyers on this topic.

 Forbes, Some Of Sam Bankman-Fried's Donations To Effective Altruism Nonprofits Tied To An Oxford Professor Are At Risk Of Being Clawed Back:

Thank you Molly for sharing this. This is an area of interest on my mind for the past days and your post answered them. Thank you.

I'm not a lawyer, but I think EA organizations (particularly those structured as trading companies rather non-profits) may need to be careful about ensuring they are not trading while insolvent. If you take a provision for funds being reclaimed, then you might need to consider your solvency at the same time.

Is there an insurance product that covers clawbacks? 

Perhaps another EA donor could sign something guaranteeing to reimburse FF grantees in the event of clawbacks? 

I imagine a lot of people are now in the awkward situation of having money in their bank that they want to spend on projects but are hesitant to because it might be clawed back at some unknown time in the next 2 years.

Counter-argument: With less EA funding now available the bar on grant applications needs to be shifted higher, so all FF grantees shouldn't be funded now.  The money could be spent better elsewhere.

Counter-counter-argument: If you're insuring pre-vetted grants (so no additional work for grant evaluators), there's only a 10-30% chance (wild guess) that you  pay out on the insurance guarantees, possibly several years down the line and you get second order positive effects via encouraging future EA project founders to take risks... maybe those multiples shift these clawback guarantees back above the line?

(Disclosure: I'm a FF grant recipient so very biased)

EDIT: I no longer endorse the idea above. One thing I hadn't understood was that in this kind of situation preference and fraudulent transfer claims usually  involve the two parties working out a settlement rather than litigating. Having a guarantee in place would change the dynamics of those negotiations.

The problem is that a lot of money was given out, so only a very few people could do this.

Probably, although I imagine this would be a custom product for a charitable entity. The closest concepts I can think of are trade credit insurance [https://icisa.org/trade-credit-insurance/] and credit default swaps.

Are you thinking that the community should consider collectively insuring against the risk of a megadonor going underwater in the future? That would be an interesting idea. I am doubtful that an insurer would be interested in writing such a policy for a single grantee seeking protection for a single megadonor in the low millions or below -- too much due dilligence would be necessary for the potential profit.

Are you thinking that the community should consider collectively insuring against the risk of a megadonor going underwater in the future?

Yeah something like that. Just trying to think of a way to make a market out of due-diligence. 

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