Last week offered a rare opportunity to watch one of the world’s biggest philanthropists self-combust in real time. The spectacular downfall of crypto-billionaire Sam Bankman-Fried (commonly known as SBF) and his cryptocurrency exchange FTX resulted in what Bloomberg called ‘history’s greatest-ever destruction of wealth‘. This made for undeniably compelling viewing, but also raises many deep and challenging questions about philanthropy.

In the broadest sense, Bankman-Fried’s disgrace seems like obvious grist to the mill of critics like Anand Giridharadas et al, who argue that elite philanthropy is merely a charade perpetrated by the rich to deflect attention from the inequality they embody and criticism of the distorting effect their wealth has in a democracy. It is certainly hard to mount much of a defence in the case of SBF, particularly because he has become prominent in recent years for making large political donations, so questions about the anti-democratic influence of big money giving seem apt. We should still, however, be wary of overly sweeping generalisations. Yes, criticism of SBF seems fair in many regards; but does that tell us something about all big money donors, or is it more to do with him as an individual and his particular approach to giving, so we should draw narrower conclusions?

Bankman-Fried is, for instance, a prominent figure in the world of cryptocurrency so does this tell us something about the future viability of ‘cryptophilanthropy’? Some nonprofits have already begun to shy away from this space: the Wikimedia Foundation, for example, announced earlier this year that it would stop accepting donations in Bitcoin and other cryptocurrencies over concerns about ‘environmental impact and general scamminess’. The FTX collapse certainly won’t do anything to lessen such concerns, so is the writing on the wall for cryptophilanthropy? At the very least, presumably, all nonprofits will be more wary of big money crypto-donors in future; and some may decide that all crypto-wealth is tainted by its very nature and thus steer clear of it.

The biggest reckoning, however, is likely to come for Effective Altruism – the philosophy-based, tech-aligned movement which promotes the idea of maximising the amount of measurable good we do in the world. Sam Bankman-Fried has long been a keen follower of EA and has close links to many of the movement’s key figures. He had also become one of EA’s biggest funders: earlier this year he launched the FTX Future Fund with ambitions to give up to $1bn to EA causes. In the wake of last week’s events, however, the entire senior management of the fund resigned, citing ethical concerns about the source of SBF’s wealth, so the future of many organisations it was supporting is in doubt.

Is the writing on the wall for cryptophilanthropy?

This loss of money is clearly important, but it may end up being secondary to the reputational damage EA suffers. Bankman-Fried had openly embraced the EA idea of ‘earning to give’ (i.e., making tons of cash in order to give to EA-endorsed organisations), and it was reportedly this that sparked his foray into cryptocurrency. He is also a keen believer in the ‘longtermist’ ideas that have come to play a central part in EA (i.e., the idea that our actions in the present should be guided by calculations about outcomes in the far future).

The suspicion is that a combination of these factors (plus a healthy dose of the intellectual hubris that many would argue is not lacking in EA) led Bankman-Fried to adopt a radical ‘end justifies the means’ mentality; and that this – either consciously or subconsciously – led him to conclude that things like financial laws and regulation were only for the little people, and clearly didn’t apply to someone as brilliant as him, who was on a mission to save the world.

Whether this is true or not is hard to know for certain, but it is telling that many in the EA community are acknowledging it as a possibility whilst going to great lengths to distance themselves from it. Philosopher Will MacAskill, for instance, who is a leading light of EA and had been a close confidante and adviser to Bankman-Fried, published a Twitter thread in which he expressed his ‘utter rage’ and his view that ‘if those involved deceived others and engaged in fraud (whether illegal or not), they entirely abandoned the principles of the Effective Altruism community’. MacAskill did however offer something of an apology anyway, saying that he had been wrong to downplay worries about ‘the misuse of EA ideas’ and urging other EAs to ‘make clear that we do not see ourselves as above common-sense ethical norms’ and to ‘engage with criticism with humility’.

But if there was deception and misuse of funds, I am outraged, and I don’t know which emotion is stronger: my utter rage at Sam (and others?) for causing such harm to so many people, or my sadness and self-hatred for falling for this deception.

— William MacAskill (@willmacaskill) November 11, 2022

There is a lot of discussion in EA circles right now, as the movement faces up to a potential existential crisis. Some argue that it needs to change considerably if it is to survive – adopting more humility, as MacAskill suggests, and perhaps even abandoning some of its more problematic ideas such as ‘earning to give’ and ‘longtermism’. But not everyone within the movement agrees; there are others who claim that the downfall of SBF was an unforeseeable ‘black swan’ event, so there is no reason for any fundamental change of direction. Which of these viewpoints wins out is likely to determine where EA goes in the future.

It is clear that Sam Bankman-Fried’s meteoric rise and fall raises many questions about elite giving, sources of wealth and Effective Altruism: questions that it is vital philanthropy as a whole faces up to rather than shying away from. However, it is important to remember that the collapse of FTX will have serious consequences for many ordinary people who were convinced to place their trust and their money in something that turned out to be built on sand. And that they are the immediate victims in this story.

Rhodri Davies is the founder of Why Philanthropy Matters.