By Calum Carmichael. (Article is downloadable as: What Can the Philanthropic Sector Take from the Downfall of Samuel Bankman-Fried and His Ties to Effective Altruism, Part 1 of 5 by Calum Carmichael, March 2023.)
Part 1: What’s going on here?
Prior to November 2022, Samuel Bankman-Fried (popularly known as SBF) was known as a successful and philanthropic entrepreneur. In both his career and giving choices he aligned himself with the ethos, methods and priorities of Effective Altruism (often shortened to EA). In his early 20s, for example, he reportedly decided to work not for a charity but in finance, believing greater good would come from his earning more to give more. In 2018, at the age of 26, he founded the cryptocurrency trading company Alameda Research to profit from crypto prices being higher in Asia than America. The following year he founded the FTX Group of cryptocurrency exchanges to service the trades of Alameda and other clients, promoting his companies as workplaces of choice for effective altruists. He based the largest of the exchanges, FTX International, first in Hong Kong and then in the Bahamas to handle popular products not legal in the US.
For both the 2020 presidential and 2022 mid-term elections, SBF was among the biggest contributors to Democratic candidates. In February 2021 he established the FTX Foundation for charitable giving, donating $50 million US that year. In June 2022, with a net worth having peaked above $25 billion US, SBF signed the Giving Pledge to donate most of his wealth during his lifetime or by will, with $16.5 billion US from FTX sources having already been earmarked for EA causes and organizations.
But in November 2022, all of this changed. Alameda and FTX declared bankruptcy. In December and into 2023, SBF was indicted on multiple charges of conspiracy to commit fraud, money laundering, foreign bribery and campaign finance violations. The charges came with a detailed account of steps taken by SBF and his associates to misappropriate $1.8 billion US in customer deposits at FTX International and use them to cover not only losses at Alameda, but also real estate purchases as well as political and philanthropic spending. One executive from Alameda and two from FTX – all of whom publicly identify as effective altruists – have pleaded guilty to fraud and agreed to co-operate with prosecutors. To date, however, SBF has pleaded not guilty on all charges. The trial is set to begin October 2023. If convicted, he could face up to 115 years in prison.
The admitted mismanagement and alleged criminality of SBF and his associates have had wide effects. They’ve caused great financial harm to the customers and creditors of FTX, as well as reputational harm to cryptocurrency markets. But they’ve also intensified pre-existing criticisms and suspicions directed to not only the ethos and methods of EA with which SBF had associated himself, but also the organizations of EA and their leaders who had associated themselves with him. These include Giving What We Can, 80,000 Hours, the Centre for Effective Altruism, and their co-founder William MacAskill. It was he who advised the young SBF that greater good could come not from his working directly for a charity but from pursuing a high-earning career in finance that would allow him to give more to EA causes.
Responding to the allegations and aware of the intensified criticism, in November 2022 MacAskill expressed his personal dismay, shame and need to reflect:
If FTX misused customer funds, then I personally will have much to reflect on. Sam and FTX had a lot of goodwill – and some of that goodwill was the result of association with ideas I have spent my career promoting. If that goodwill laundered fraud, I am ashamed. As a community, too, we will need to reflect on what has happened, and how we could reduce the chance of anything like this from happening again…. I know that others from inside and outside of the community have worried about the misuse of EA ideas in ways that could cause harm. I used to think these worries, though worth taking seriously, seemed speculative and unlikely. I was probably wrong. –MacAskill
To be sure, the criticisms amplified since the downfall of SBF have been directed specifically toward Effective Altruism. That said, I believe they have ramifications that extend to the philanthropic sector as a whole. They deserve to be heard, reflected upon and heeded more widely.
What are we to take from this?
To support that wider attention and reflection, I’m preparing a five-part series for PANL Perspectives of which this is the first part. For this series, I’ve condensed the major criticisms of EA that have been linked to SBF and sequenced them into seven points grouped under three headings – as follows:
The philosophical foundations of Effective Altruism
1. The ethical bases of EA rely on a narrow version of utilitarianism to the exclusion of other ethical theories or considerations, such that they encourage its adherents – through their philanthropy – to pursue purportedly good ends using potentially harmful or corrupting means.
2. Those excluded considerations include human emotion or loyalty as guides to philanthropic choice, such that EA undercuts philanthropists’ agency and overlooks or opposes key aspects of human motivation.
The analytical approaches of EA
3. By relying on impartial reason to identify the philanthropic interventions that will do the most good, EA idealizes a methodology that quantifies and compares the value and probabilities of alternative and highly-speculative outcomes – thereby mistaking mathematical precision for truth and ignoring important qualities of human life and flourishing that are not readily quantified.
4. This methodology – bolstered by its ethical assumptions and claims of impartiality – cultivates hubris, a condescension toward and dismissal of contending priorities or sources of information, and the impulse to define and control philanthropic interventions on one’s own terms.
5. Moreover, this methodology – by focusing on separate, numerically-evaluated interventions – overlooks the wider behavioural, institutional or systemic conditions that might not only limit the effectiveness of the interventions themselves but also cause or perpetuate the societal ills they seek to address.
The ultimate effects of EA
6. By not addressing those systemic conditions, EA takes on a conservative agenda: one that distracts from and thereby perpetuates the political, social and economic status quo and the inequalities and deprivations therein.
7. Accordingly, in its formation, methods, application and effect, EA is elitist: it risks becoming an intellectual, do-gooder playground for the privileged who ultimately benefit from – and through their philanthropy avoid substantially changing or challenging – the inequalities of the world around them.
The next four part of this series
The four remaining parts of this series will appear in coming months. Part 2 provides an overview of EA, thereby setting the stage for the arguments, counterarguments and broader implications to follow. Parts 3, 4 and 5 cover those arguments and implications as they relate to the philosophical foundations, analytical approaches and ultimate effects. For each part, my goal isn’t simply to summarize the contended demerits or merits of EA, but to derive from them questions for the philanthropic sector as a whole – so that regardless of our different connections to the sector, we can each learn or take and possibly apply something from the downfall of Samuel Bankman-Fried and his ties to EA.
Photos are courtesy of Wikimedia Commons, Abraham OFM, Cointelegraph and Sam Deere.
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