Original article | Odaily Odaily( @OdailyChina )
Author｜jk
In November 2022, the collapse of FTX shocked the entire crypto world and left a deep and lasting wound on the industry's trust. The world's second-largest exchange went bankrupt in just a few days, its founder Sam Bankman-Fried (SBF) was sentenced to 25 years in prison for fraud, $8 billion of customer funds disappeared, and creditors were left to suffer through a lengthy compensation process.
However, a recent event has continued the FTX story, with the protagonist shifting from traders to lawyers, and the incident transforming from a charitable donation into a legal battle. This case, concerning a $650,000 charitable donation, is brought to you by Odaily Odaily:
cause
The story begins in April 2022. At that time, FTX was at its peak and was aggressively recruiting. Ross Rheingans-Yoo, a trader who had previously worked at Jane Street, a well-known quantitative trading firm on Wall Street, was recruited by SBF to join the FTX Foundation as a project manager.
Like many other makeshift arrangements by FTX, Rheingans-Yoo's terms of employment were not documented in a formal contract, but rather in a shared Google document titled "Final Ross Terms." This document promised him "at least $1 million in discretionary bonuses," half of which would be paid in cash and the other half as a donation to a charity of his choice.
This compensation structure, consisting of half cash and half charitable donations, is a reflection of FTX and SBF's own beliefs and the Effective Altruism (EA) movement, and was also part of FTX's own brand propaganda at the time. (Effective Altruism is a philosophy and social movement that advocates using reason and evidence to determine how to maximize good deeds. SBF himself is a representative figure of this movement, publicly stating that his purpose in entering the financial industry was to "earn money and donate it to charity.")
By September 2022, after working at Rheingans-Yoo for about five months, SBF told him that as a bonus for the first half of 2022, he would receive $650,000 in cash, plus “an additional $650,000 in targeted grants to any effective altruistic-driven philanthropy you want.”
Just two months later, in November 2022, FTX collapsed. At the time of bankruptcy, Rheingans-Yoo hadn't even had a chance to tell FTX where to send the $650,000 charitable donation.
He's here, he's here! He's coming with a claim for damages.
Following bankruptcy, Rheingans-Yoo filed several claims with the bankruptcy court, including:
- The remaining $275,000 cash prize (he claims to have only received $375,000 of the $650,000 prize).
- $650,000 in targeted charitable grants
- Other unpaid wages
After a lengthy legal process, the bankruptcy judge ultimately ruled that he was entitled to the $650,000 . Because FTX's bankruptcy liquidation ultimately achieved a repayment rate of over 100% for unsecured creditors, 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, given Manifold's close ties to the effective altruistic community, and Rheingans-Yoo himself serving on the board of Manifold for Charity.
However, FTX's bankruptcy administration team strongly opposed this arrangement. Their reasons included:
- FTX is suing Manifold to recover previously disbursed funds.
- Rheingans-Yoo's position on the Manifold board presents a clear conflict of interest.
- He will have direct control over the allocation of these funds, meaning that donating to this charity is essentially putting the money directly into his own pocket.
More importantly, FTX's lawyers argue that this arrangement perpetuates the core pattern of FTX's fraud: "FTX insiders siphon funds from creditors and donate them to 'charities' to enhance their personal reputation and profit from effective altruistic acquaintances."
Faced with opposition, Rheingans-Yoo expressed a willingness to compromise, proposing to designate the donation to another effective altruistic charity: 1DaySooner Inc. —an organization dedicated to promoting human challenge trials to accelerate vaccine development.
However, the law firm Sullivan & Cromwell, representing FTX's bankruptcy administration team, rejected the change. Their reasoning was astonishing: the court order only allowed allocation to " the Effective Altruism-driven charity," not " any Effective Altruism-driven charity."
In other words, because Rheingans-Yoo only had one chance to choose, and he made the wrong choice the first time, he cannot choose another charity.
The Bloomberg report ironically stated: "No lawyer can resist the opportunity—'Aha, if the document said 'a,' you'd get $650,000, but it says 'the,' so you don't get it. That's what makes lawyers alive."
The judge did not accept it.
In January 2025, at a hearing in the Delaware Bankruptcy Court, Judge Karen B. Owens expressed strong dissatisfaction with the technical defenses put forward by the FTX bankruptcy administration team.
Judge Owens ruled that Rheingans-Yoo could reassign $650,000 to 1DaySooner Inc. because the FTX Trust had “absolutely no credible basis” to object to the change.
She further criticized the FTX management team's actions as "completely unreasonable and without any legal or factual basis," leading to "wasteful litigation."
“I believe the trust has been harmed, the claimants have been harmed, and the court has been harmed,” Judge Owens said at the hearing.
She also approved a motion to impose sanctions on the FTX Trust, which is quite rare in bankruptcy cases.
However, FTX's bankruptcy administration team did not give up. A week later, they filed an appeal, taking the case to the U.S. District Court for the District of Delaware to continue challenging the ruling.
The shadow of $71.6 million
To understand why FTX's bankruptcy administration team is so fixated on this $650,000, it's essential to understand their larger lawsuit against Rheingans-Yoo.
In July 2023, FTX filed a lawsuit against several defendants, including Rheingans-Yoo, seeking to recover $71.6 million in investments and donations. These funds, channeled through the FTX Foundation and Rheingans-Yoo's Latona Biosciences Group, flowed to six life science companies, including Lumen Bioscience, GreenLight Biosciences, and Riboscience, between February and October 2022.
FTX's lawyers claimed:
- Latona Biosciences Group is a "fake" nonprofit organization registered in the Bahamas.
- These investments were made without any due diligence or independent valuation.
- Its true purpose is to accumulate political capital and influence for the SBF, rather than genuine charity.
- These transfers are intended to obstruct, delay, or defraud current or future creditors.
The lawsuit also targets Nicholas Beckstead, CEO of the FTX Foundation and a highly respected philosopher in the effective altruism community. Beckstead, who worked for many years at the Future of Humanity Institute at Oxford University and Open Philanthropy, is a major contributor to the philosophy of "long-term futurism." He and the entire Future Fund team resigned when FTX collapsed, expressing "shock and deep sadness" in their resignation statement.
Rheingans-Yoo vehemently denies all allegations. He argues:
- He was not a member of SBF's "inner circle" and was unaware of FTX's fraudulent activities.
- His work in Latona was entirely aimed at "bringing positive results to society."
- Every investment is carefully analyzed and due diligence is conducted.
“Rheingans-Yoo was a loyal employee who found himself in a predicament that he did not create,” his lawyer wrote in court documents.
From charity machine to lawyer's ATM
In a sense, these two cases perfectly illustrate the past and present of FTX.
The story is finished. But please consider this: in this case, was FTX's bankruptcy liquidation team necessarily righteous?
As the comment quoted at the beginning of the article states, before its collapse, FTX was "a massive machine that channeled funds from crypto traders to effective altruistic charities." The FTX Foundation claimed to have donated over $190 million before its downfall and had planned to donate $1 billion by 2022.
But after bankruptcy, FTX became "a machine for feeding money to lawyers." Protracted legal battles ensued for every charitable donation, every investment, and every promise. The cost of these legal battles was epic.
According to the latest court records, as of January 2025, the FTX bankruptcy case has generated nearly $1 billion in legal and advisory fees—$948 million has already been paid, and over $952 million has been approved by the court. This makes FTX one of the most expensive bankruptcies in the U.S. since Lehman Brothers ($6 billion) in 2008, exceeding the combined costs of all other cryptocurrency bankruptcies such as Celsius, BlockFi, Genesis, and Voyager ($502 million).
The lead law firm, Sullivan & Cromwell, alone charged over $248 million, with its partners earning as much as $2,165 per hour; financial advisors Alvarez & Marsal charged approximately $306 million; and even the consulting firm of bankrupt CEO John Ray III charged over $8 million.
John's hourly wage is $1,300, which is approximately 9,019 RMB.
If you could earn 10,000 RMB per hour from a bankruptcy case, would you prefer the case to end quickly or slowly?
Ironically, at one point in late 2023, the legal fees bill ($1.45 billion) even exceeded the client's actual losses ($1.422 billion). On a daily basis, FTX paid lawyers and advisors approximately $1.4 million per day, or $53,000 per hour, at the height of the bankruptcy. Critics pointed out that FTX had only 200 employees and operated for just three years, while Enron had 20,000 employees, engaged in fraud for nearly 10 years, and created 3,000 complex off-balance-sheet entities. Yet, FTX used 75% of Enron's bankruptcy expenses to deal with only 4% of its assets. This lawsuit concerning $650,000 and $71.6 million is a microcosm of the continued operation of this "lawyer ATM."
Remember, all of this money came from the company's accounts after FTX crashed.
Moreover, FTX is gone, so who cares how much this dead behemoth has to pay its lawyers?
In other words, although the affected clients received 100% compensation, they lost all the profits from Bitcoin's rise from $16,000 to $100,000, and from Solana's rise from $20 to $200. A significant portion of these profits ended up in the pockets of the lawyers.
Now you know why lawyers engage in "wasteful litigation"?
Facebook co-founder Dustin Moskovitz, a major backer of the effective altruism movement, questioned on Twitter after the FTX crash: "Either effective altruism encouraged Sam's unethical behavior or provided a convenient justification for it."
To be continued
As of now, this story is far from over. FTX's bankruptcy administration has filed an appeal (again, why?) , and the $650,000 donation case will continue to be heard in federal district court. A $71.6 million lawsuit is also ongoing. The cases described above are a microcosm of the chaos following FTX's bankruptcy.
How will these cases ultimately end? Will those life science companies be forced to return their investments? Will Rheingans-Yoo be found guilty of aiding and abetting fraud? Will the $650,000 ultimately reach 1DaySooner's account? Odaily will continue to follow and report on these cases.
