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.

Your reminder that this was from August of this year. And, yes, there is a caveat. But the headline isn’t exactly “The Next Elizabeth Holmes?”

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.