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If Sequoia Capital can get fooled - presumably after more due diligence and apparent access to books than you could possibly have gotten while dealing with the charitable arm of FTX FF that was itself almost certainly in the dark - then there is no reasonable way you could have known.

Sequoia has different incentives than EA. By design investments have limited liability, and “companies should be leveraged and hold a linear utility curve” is a dominant concept in finance. FTX unethically using customer deposits would’ve broadly aligned with Sequoia’s interests so long as Sequoia retained the ability to distance themselves from legal and reputational damage.

Sequoia was incentivized to engage in a degree of wilful ignorance, and I would suspect they did so.

It may be difficult to parse what happened as an outsider, but for those who work in or near finance it is clear that Sam engaged in wildly unethical and illegal behaviour.

At a minimum, Sam played a reckless game with customer deposits and gambled with money that was never his. At the worst, Sam had suffered massive losses in his hedge fund and tried to use FTX deposits to survive (creating a form of Ponzi scheme). At the moment it appears a mix of the two of is true. It’s horrific fraud either way.

The hole he has dug is very, very deep (billions of dollars deep) and a redemption arc is not forthcoming.

The former, with the latter as its first order cause.

I think the most appropriate course of action won’t be discernable for a while. But returning the present net balance of funds is clearly the correct move, while the ethical decision regarding returning past funds is ambiguous.

EA is not an insurance fund. Beyond simply not being feasible, paying back all lost funds would create a significant moral hazard and attract bad actors who wish to appear trustworthy to the public.

It’s worth pointing out that EA as a community does not directly generate revenue. If EA were to pay back funds already spent then those funds must come from new or existing donors, and that may be a particularly tough sell.

In addition, I think most of us are familiar with the Copenhagen Interpretation of Ethics. While returning donations from unethical sources would likely reflect well upon EA, soliciting new donations to pay back past donations may be perceived differently, especially in light of existing questions surrounding the knowledge and/or involvement of EA leadership.

The collapse of an exchange is qualitatively different than the collapse of coin. His clients did not perceive risk, and there was no compensation for the risk that they were unknowingly subject to. That is fraud.

Moreover, if SBF viewed fraudulent behaviour for the purposes of EA as “high-risk high-reward” it signals there are norms within EA that are in dire need of clarification and/or change. Tolerance for fraud would lead to disastrous consequences for EA in the long-run. 

Tangential to #2, there’s a scenario where this ends up as a reputational nightmare for EA.

  1. If SBF committed fraud, there’s a distinct possibility that SBF will use altruism as a defence and/or justification for his actions in the coming months.
  2. If the above happens, the issue may not die anytime soon. Given the scope of the event, and Sam’s prominence within EA, it would become a borderline obligation for any media outlet to mention it in any coverage of EA for years to come.
  3. Depending on how things break, anyone with a public association with EA may be viewed through the lens of either “dangerously overcommitted to utilitarianism,” or “using EA as a cover for unethical behaviour.”

The author that Sequoia paid to write SBF’s puff piece (linked in earlier comment) has already put out a tweet to this effect:

A bad day for #SBF but even worse for #EA. Is this #ultilitarianism as psychological cover to run a #Ponzi scheme?


My concern at this point is the willingness of MacAskill and other prominent EA’s to condemn SBF. “Wait and see” is often preferred, but there may be permanent damage to EA’s reputation if SBF is not disavowed by EA leadership in due time.

Underlying #1 and #3, there’s the additional question of to what extent EA was motivation for SBF to engage in unethical behaviour.

Sequoia, one of the major investors in FTX, paid a writer to do a lengthy puff piece on SBF in September. EA makes numerous appearances:


And MacAskill—Singer’s philosophical heir—had the answer: The best way for him to maximize good in the world would be to maximize his wealth.

SBF listened, nodding, as MacAskill made his pitch. The earn-to-give logic was airtight. It was, SBF realized, applied utilitarianism. Knowing what he had to do, SBF simply said, “Yep. That makes sense.” But, right there, between a bright yellow sunshade and the crumb-strewn red-brick floor, SBF’s purpose in life was set: He was going to get filthy rich, for charity’s sake. All the rest was merely execution risk.

EA will be subject to intense scrutiny if SBF viewed  reckless and fraudulent behaviour as execution risk for altruistic goals.