Charity or Scam? Former FTX Executive’s Foundation Accused of Making Profits from Employee Token Prices – CryptoNewsTo

Charity or Scam? Former FTX Executive’s Foundation Accused of Making Profits from Employee Token Prices

Source: AdobeStock / blacksalmon

A former FTX executive’s foundation allegedly turned a donation of some $600,000 in FTT tokens into a whopping $150 million. And he now wants to cash out the frozen assets. 

The Wall Street Journal reported, citing people familiar with the matter, that Ruairi Donnelly, while working at FTX and its parent company Alameda Research, assisted in running a charity foundation focused on promoting artificial intelligence (AI) and effective altruism. These were interests he reportedly shared with the disgraced FTX founder and former CEO Sam Bankman-Fried. 

So who is Donnelly? 

He was one of the company’s first employees, becoming its chief of staff in 2019, working with no formal title at FTX and Alameda up to that point, sources alleged. In 2020, he left these companies for his work at a charity foundation.

And being an early commer to FTX got him some benefits – namely, these employees were offered FTT for 5 cents per coin in 2019 prior to it being offered to the public for $1. 

Donnelly, per his lawyer, asked for $562,000 of his salary to be exchanged into FTT, which came to some 11.2 million coins. He also requested for these coins to be sent as grant to a Switzerland-based charity, Polaris Ventures, which Donnelly co-founded, the WSJ alleged, citing the foundation’s financial statements. 

Then, per the people speaking with the WSJ and Polaris Ventures’s financial statements, 

“The foundation made millions of dollars selling the tokens after they began trading publicly at $1 in 2019 and 2020, while Mr. Donnelly was still working at FTX.”

The foundation was originally called the Center for Emerging Risk Research, formed without a commercial interest in mind. Polaris soon started participating in investments in AI companies, such as a first round of fundraising for Anthropic in 2021. Polaris, along with Bankman Fried, put more money into Anthropic in 2022, with the company’s value subsequently quadrupling. 

According to the people familiar with the matter,

“[Polaris’] wealth largely stems from the initial transfer of FTT in 2019.”

And this is now an issue in the bankruptcy court. 

Ex-exec and frozen funds

Now, in the midst of FTX’s bankruptcy and other legal proceedings, the exchange’s digital assets are frozen, meaning that neither clients nor anybody else can access them.

But Donnelly’s lawyer claimed that the coins sent to the foundation do not belong to FTX at all – they were meant for unpaid wages, stating that, 

“To be absolutely clear, the FTT that Mr. Donnelly directed to be donated on his behalf to Polaris were not FTX’s funds.”

Per the report, citing 2019 financial statements, Polaris “received a grant of 11,850,729 FTT” but there was no mention of it being for employee compensation. Not even half a year later, these FTT had appreciated to almost $20 million.

Donnelly now wants Polaris Ventures to exit from its FTX position by selling the rights to its exchange account for cents on the dollar, according to the sources.

Meanwhile, Donnelly’s colleague from FTX and Alameda also donated wages worth $30,000, “taking the foundation’s total FTT at the time to 11.8 million, worth roughly $600,000 then,” the report said, citing the lawyer. 

Some $30 million of the foundation’s $150 million in assets are frozen with the exchange’s assets. Most of its assets are held in cash, crypto, and investment stakes. 

The fact that Polaris Ventures’ wealth came from FTX transactions is causing it issues during the FTX bankruptcy proceedings, so unlike other investors who sold their exchange accounts to investors at discounts – Polaris can’t do so. 

Not only are the original companies – FTX and Alameda – under scrutiny, but the exchange’s coin is as well. FTT has been facing heavy criticism over allegations that it’s susceptible to manipulation, as well as its role in the falls of FTX and crypto lender Celsius.  

And it’s not only the investors who want out. Much like Donnelly, other former employees want to abandon the shipwreck asap. Adam Cole Jacobs, FTX’s former global head of payments, allegedly recently sold to investors a $15 million claim based on a severance package. These investors will now try to collect the money through the bankruptcy process, according to sources. 

Meanwhile, as reported on Tuesday, a US judge put cases against Bankman-Fried brought by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on hold until the criminal cases against him are concluded, arguing that the outcome of the criminal case would likely affect what issues remained in the civil cases.


Learn more: 
– Google Invests in AI Company Anthropic Despite Ties to FTX Co-Founder Sam Bankman-Fried
– Prosecutors Voice Concern Over Bankman-Fried’s Use of VPN

– FTX New Management Sets February Deadline for Repayment of Political Donations Made by Executives
– FTX Japan Bidding Deadline Extended

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