What If Your Donor Turns Out to Be a Crook?
What If Your Donor Turns Out to Be a Crook?
On Sam Bankman-Fried and related questions.
Welcome to Second Rough Draft, a newsletter about journalism in our time, how it (often its business) is evolving, and the challenges it faces.
Like many people, I’ve been following the collapse of crypto empire FTX— and the seemingly compulsive chatter about it by founder Sam Bankman-Fried (SBF)— with fascination. One interesting aspect is the implications for fundraising for nonprofit journalism, and I want to talk about that this week.
First, some disclosure (or more nearly disclaimer): it’s public knowledge that SBF gave money to ProPublica (where I used to run the business side and still consult a bit), and the Intercept (where I have also consulted); other recipients are in similar positions. I had nothing to do with either gift—wasn’t involved (the ProPublica gift came after I retired), didn’t know about them in advance. I have never met SBF, nor, as far as I can recall, ever had anything to do with him or his philanthropy. My observations on this don’t reflect the views of either org, or any of my clients, and haven’t been reviewed by them.
Was it a mistake to accept these gifts when they were offered?
Clearly not, in my view, for at least two big reasons. First, I am not a fan of screening donors (or advertisers, including in the for-profit legacy news business) for some sort of moral test. If a newsroom starts doing that, they end up creating one list of donors/advertisers they are at least implicitly endorsing, and another they are at least implicitly condemning. Both lists will undermine how people see the independence of their news coverage: “XYZ is good enough for us” should make you wonder about coverage of XYZ; so should “ABC doesn’t meet our standards” when it comes to stories about ABC.
Second, while you wouldn’t want to take money from known criminals or money you knew to be the fruits of crime, anyone who says they knew that SBF failed these tests months ago is being at best disingenuous. If you were on to SBF’s self-dealing and possible criminal behavior before this Fall, why didn’t you tell anybody? If you are in the journalism business, why weren’t you actively investigating what may well turn out to be the largest business fraud in many years? Perhaps because, while you may have wondered about SBF, you didn’t actually know or even strongly suspect.
Should you give back the money you have received?
This is a more complicated question, I think, and one where different recipients stand in different positions. As I said above, you wouldn’t want to take money you knew to be the fruit of crime. Similarly, you ought to return money that later turns out to have been garnered that way, even if you didn’t know that at the time you received it. In some cases, the law may require such a result.
It’s too soon, at least from everything I’ve read, to know when or if SBF and his money crossed this line. But these questions will eventually be answered, if not in the bankruptcy court, then perhaps in a criminal proceeding. When they are, recipients of the money should act accordingly, with the answers likely varying according to when the money was received.
Was it reasonable to accept gift commitments that weren’t yet funded?
Some of SBF’s grants extended over multiple years, the rest of which now seem quite unlikely to ever be paid out. Should these have been accepted, setting internal expectations, and triggering plans (including job offers)? In considering this question, it’s worth pointing out that SBF is far from the only donor to fund his foundation on a pay-as-you-go basis, rather than endowing it. Until a few years ago, for instance, George Soros did much the same thing with the well-established Open Society Foundations. The same is true of quite a few other living donors.
I don’t think that gift recipients, in general, can be expected either to refuse multi-year gifts from such donors, or to take no steps in reliance on them. Having said that, anyone who was highly confident that a large future gift premised on a crypto fortune was a sure thing simply doesn’t understand the nature of these or other highly speculative enterprises. I doubt that any of SBF’s newsroom grantees made this error.
Finally, a question of motives
I have no idea if Sam Bankman-Fried contributed to nonprofit journalism in order to spur change in areas like pandemic preparedness or whether he was just burnishing an image and building brands, viewing reporters as more or less interchangeable with the patches FTX placed last season on the uniforms of Major League Baseball umpires. His compulsive interviews have provided grist for both theories. Perhaps both were once real.
But the motivations of donors, if legal, shouldn’t be the concern of fundraisers. From Jesus’s admonition about the difficulty of the rich getting into heaven to Andrew Carnegie’s pronouncement that “the man who dies rich dies disgraced,” philanthropy has long been recognized as morally complex. For the recipients of the largess, it is their own behavior (for journalists, particularly independence, and especially in newsgathering), not that of the donors, that should be the focus of their policing.
This is a great topic - thank you. The nature of actual conflict of interest, the appearance of conflict of interest, and finally, burnishing one's image remains a sticky wicket. The Koch Brothers and every cultural institution/medical center in New York is an apt example of polishing things up while doing destructive things with your other hand. And the list is never-ending of tainted donors through history. Journalistic non-profits are in a particularly difficult position. Is there a 'Chinese wall' (there must be a better term for that) between the newsroom and the donors - suuuuuuure there is. In medicine, we must disclose the conflicts of interest at the end of every journal article but how does that really help? How is a reader supposed to interpret that conflict - exactly how much do you discount what is said? Re: Donors and News non-profits - It would be best to have a central donor pool that was then re-distributed to non-profits in some way 'dis-attached' from the source but that will never happen because that is not why most donors give.
Over the past few years nonprofits have clearly demonstrated they’re willing to take money from anyone and not ask questions about it. Why should we be surprised that media organizations are no different.
Universities and other organizations were eager to accept donations from Jeffrey Epstein with no concern for his sex trafficking. For example the bulk of Epstein's donations to MIT — $750,000 of $850,000 — came after his 2008 guilty plea. Of course they all claim not to have known or even suspected.
Now you have media whose job it is to ask questions and be suspicious claiming “we didn’t know” and “it’s not our job to ask questions or pass judgment..” Really?
Did nobody really suspect SBF was running a Ponzi scheme in an unregulated industry that had already proven itself ripe for fraud and corruption?
I get it that many journalists and investors were dazzled by the idea of being part of the “next big thing.” Sometimes you don’t know because at some point you decided not to ask the right questions.
And getting large sums of money when you need it does tend to dull curiosity about the source and motivation for the giving of that money.
Also the idea that as you say media shouldn’t be “…screening donors (or advertisers, including in the for profit legacy news business) for some sort of moral test” is at odds with history and how the business works. Every news organization has somebody they won’t accept from money from.