Author|jk
In November 2022, the collapse of FTX shocked the entire crypto world, leaving a long-lasting scar on the industry's trust. The world's second-largest exchange went bankrupt within a matter of days, its founder Sam Bankman-Fried (SBF) was sentenced to 25 years in prison for fraud, $8 billion in customer funds went missing, and creditors were left tormented by a drawn-out repayment process.
However, a recent event has continued the FTX saga, shifting the protagonists from traders to lawyers, and the event from charitable donations to litigation. A charity donation case involving $650,000, told for you by Odaily Planet Daily:
Origin
The story begins in April 2022. At that time, FTX was at its peak, aggressively recruiting talent. Ross Rheingans-Yoo, a trader who had previously worked at the well-known Wall Street quantitative trading firm Jane Street, was recruited by SBF to join the FTX Foundation as a project lead.
Like many other makeshift arrangements at FTX, Rheingans-Yoo's employment terms were not formalized in a contract but were recorded in a shared Google Doc titled "Final Ross Terms." This document promised him "a discretionary bonus of at least $1 million," with half paid in cash and the other half paid as a donation to a charity of his choice.
This half-cash, half-charity-donation compensation structure was a reflection of FTX and SBF's own belief, which was closely intertwined with the Effective Altruism (EA) movement, and was also part of FTX's own branding and publicity at the time. (Effective Altruism is a philosophy and social movement that advocates using reason and evidence to determine how to do the most good. SBF himself was a prominent figure in this movement, publicly stating that his purpose for entering the financial industry was to "make money to donate to charity.")
By September 2022, after Rheingans-Yoo had worked for about five months, SBF informed him that, as a bonus for the first half of 2022, he would receive $650,000 in cash, plus "another $650,000 in directed grants to any Effective Altruism-driven charity you want."
Just two months later, in November 2022, FTX collapsed spectacularly. At the time of bankruptcy, Rheingans-Yoo had not yet told FTX where that $650,000 charity donation should be sent.
Here He Comes, Walking In With a Claim
After the bankruptcy, Rheingans-Yoo filed multiple claims with the bankruptcy court, including:
- A $275,000 cash bonus balance (he claimed he only received $375,000 of the $650,000)
- The $650,000 directed charity grant
- Other unpaid wages
After a lengthy legal process, the bankruptcy judge ultimately ruled that he was entitled to this $650,000. Since FTX's bankruptcy liquidation ultimately achieved an unsecured creditor recovery rate of over 100%, he received the full amount.
Rheingans-Yoo initially chose to donate the money to Manifold for Charity—the charitable arm of the prediction market platform Manifold Markets. This choice was not surprising, as Manifold is closely tied to the Effective Altruism community, and Rheingans-Yoo himself serves on the board of Manifold for Charity.
But the FTX bankruptcy management team strongly opposed this arrangement. Their reasons included:
- FTX was suing Manifold to recover previously disbursed funds
- Rheingans-Yoo's position on Manifold's board represented a clear conflict of interest
- He would directly control the distribution of these funds, meaning sending the money to this charity was equivalent to putting it directly into his own pocket
More importantly, FTX's lawyers believed this arrangement perpetuated the core pattern of FTX's fraud: "FTX insiders siphoning funds from creditors to donate to 'charities' to enhance personal reputations and benefit Effective Altruism acquaintances."
Faced with opposition, Rheingans-Yoo expressed willingness to compromise, proposing to instead designate the donation to another Effective Altruism charity: 1DaySooner Inc.—an organization dedicated to promoting human challenge trials to accelerate vaccine development.
However, Sullivan & Cromwell LLP, the law firm representing the FTX bankruptcy management team, rejected this change. Their reason was astonishing: the court's order only permitted allocation to "the Effective Altruism-driven charity" (that specific one), not "any Effective Altruism-driven charity" (any such charity).
In other words: because Rheingans-Yoo only had one chance to choose, and he chose wrong the first time, he cannot choose another charity.
As Bloomberg's report very ironically stated: "No lawyer can resist such an opportunity—'Aha, if the document said "a," you'd get the $650,000, but it says "the," so you don't get it.' This is precisely why lawyers live."
The Judge Isn't Buying It
In January 2025, at a hearing in Delaware Bankruptcy Court, Judge Karen B. Owens expressed strong dissatisfaction with the FTX bankruptcy management team's technical objection.
Judge Owens ruled that Rheingans-Yoo could re-designate the $650,000 to 1DaySooner Inc., because the FTX estate had "no credible basis whatsoever" to oppose this change.
She further criticized the FTX management team's approach as "completely unreasonable, with no basis in law or fact whatsoever," leading to "wasteful litigation."
"I think the estate has been harmed, the claimant has been harmed, and the court has been harmed," Judge Owens said during the hearing.
She also approved a motion for sanctions against the FTX estate, which is quite rare in bankruptcy cases.
However, the FTX bankruptcy management team did not stop there. A week later, they filed an appeal, taking the case to the Delaware federal district court, continuing to challenge the ruling.
The Shadow of $71.6 Million
To understand why the FTX bankruptcy management team is so fixated on this $650,000, one must be aware of another, much larger lawsuit they have filed against Rheingans-Yoo.
In July 2023, FTX sued Rheingans-Yoo and several other defendants, seeking to recover $71.6 million in investments and donations. These funds, channeled through the FTX Foundation and the Latona Biosciences Group led by Rheingans-Yoo, flowed to six life sciences companies between February and October 2022, including Lumen Bioscience, GreenLight Biosciences, Riboscience, and others.
FTX's lawyers alleged:
- Latona Biosciences Group was a "sham" non-profit registered in the Bahamas
- These investments were made without any due diligence or independent valuation
- Their true purpose was to accumulate political capital and influence for SBF, not genuine charity
- These transfers were made with the intent to hinder, delay, or defraud present or future creditors
The lawsuit also targeted Nicholas Beckstead—the CEO of the FTX Foundation, a highly respected philosopher in the Effective Altruism community. Beckstead had worked for years at the University of Oxford's Future of Humanity Institute and Open Philanthropy, and is a significant contributor to the philosophy of "longtermism." When FTX collapsed, he and the entire Future Fund team resigned collectively, expressing "shock and profound sadness" in their resignation statement.
Rheingans-Yoo vehemently denied all allegations. He argued:
- He was not part of SBF's "inner circle" and was unaware of FTX's fraudulent activities
- His work at Latona was solely for "bringing about positive outcomes for society"
- Every investment underwent careful analysis and due diligence
"Rheingans-Yoo was a loyal employee who found himself in a predicament not of his own making," his lawyers wrote in court documents.
From Charity Machine to Lawyer ATM
In a sense, these two cases perfectly illustrate the past and present of FTX.
The story is finished. But readers are asked to consider, in this case, is the FTX bankruptcy liquidation team necessarily righteous?
As the comment quoted at the beginning of the article said, pre-bankruptcy FTX was "a giant machine transferring funds from crypto traders to Effective Altruism charities." The FTX Foundation claimed to have donated over $190 million before its collapse and originally planned to donate $1 billion in 2022.
But post-bankruptcy, FTX became "a machine transferring funds to lawyers." Around every charity donation, every investment, every promise, protracted legal battles have unfolded. The cost of these legal battles is epic.
According to the latest court records, as of January 2025, the FTX bankruptcy case had generated nearly $1 billion in legal and advisory fees—$948 million already paid, with over $952 million approved by the court. This makes FTX one of the most expensive bankruptcies in the US since Lehman Brothers ($6 billion) in 2008, with its fees even exceeding the sum of all other cryptocurrency bankruptcies like Celsius, BlockFi, Genesis, and Voyager combined ($502 million).
The lead law firm, Sullivan & Cromwell alone, charged over $248 million, with partner hourly rates as high as $2,165; financial advisor Alvarez & Marsal charged about $306 million; even the consulting firm of bankruptcy CEO John Ray III received over $8 million.
John's own hourly rate is $1,300, approximately 9,019 RMB.
If you could earn ten thousand RMB per hour from a bankruptcy case, would you want the case to end quickly or slowly?
Even more ironically, at a certain point in late 2023, the legal fee bill ($1.45 billion) even exceeded the actual customer shortfall ($1.422 billion). On a daily basis, FTX was paying lawyers and advisors about $1.4 million per day, or $53,000 per hour, at the peak of the bankruptcy. Critics have pointed out that FTX had only 200 employees and operated for just 3 years, while Enron had 20,000 employees, fraud lasting nearly 10 years, and created 3,000 complex off-balance-sheet entities, yet FTX used 75% of Enron's bankruptcy costs to handle only 4% of the asset size. This litigation over $650,000 and $71.6 million is also an epitome of this "lawyer ATM" continuing to operate.
Remember, all this money comes from the accounts of the collapsed FTX.
And FTX is already gone, so who is overseeing how much this dead behemoth pays its lawyers?
In other words, while the damaged customers received 100% compensation, the profits from Bitcoin rising from $16,000 to $100,000, and Solana rising from $20 to $200, are gone. A significant portion of these potential profits ended up in the pockets of the lawyers.
Now you know why lawyers engage in "wasteful litigation," right?
Facebook co-founder Dustin Moskovitz, a major funder of the Effective Altruism movement, questioned on Twitter after FTX's collapse: "Either Effective Altruism encouraged Sam's unethical behavior, or it provided a convenient rationalization for it."
To Be Continued
As of now, this story is far from over. The FTX bankruptcy management team has already filed an appeal (once again, why is that?), and the $650,000 donation case will continue to be heard in federal district court. The $71.6 million lawsuit is also still ongoing. The case described above is just a microcosm of the post-bankruptcy chaos at FTX.
How will these cases ultimately conclude? Will those life sciences companies be forced to return the investments? Will Rheingans-Yoo be found to have assisted in fraud? Will the $650,000 finally reach 1DaySooner's account smoothly? Odaily will continue to track and report for you.
