UK Inquiry Clears FTX-Backed Charity Trustees of Misconduct

A UK government inquiry into the Effective Ventures Foundation (EV), a charity backed by the now-defunct crypto exchange FTX, has concluded that its trustees managed the crisis surrounding FTX’s collapse with commendable speed and diligence. The Charity Commission’s investigation focused on how the trustees handled the charity’s assets and their legal duties in the aftermath of FTX’s bankruptcy announcement in 2022.

The inquiry stemmed from a Serious Incident Report filed by EV after FTX, a major donor, declared bankruptcy amid allegations of criminal activities. This report also disclosed that the CEO of the FTX Foundation and an unpaid advisor to the FTX Future Fund were among EV’s trustees, prompting concerns about potential conflicts of interest and risks to the charity’s assets.

The commission’s probe aimed to evaluate the trustees’ compliance with their legal obligations and the overall governance of the charity. One significant action by the trustees was to ‘ringfence’ approximately £3.3 million and $300,000 in FTX donations. They informed the National Crime Agency to ensure these funds were not tainted by potential criminal activities, thereby safeguarding the charity from accusations of money laundering.

Furthermore, during the tumultuous period following FTX’s collapse, EV and its US counterpart agreed to repay FTX a total of $26.8 million in 2022. In a notable financial move, the charity also listed Wytham Abbey for sale, a property purchased with a £17 million grant in 2021.

The Charity Commission’s report also highlighted the trustees’ decision to exclude the two FTX-linked trustees from any decisions related to the FTX bankruptcy, labeling them as ‘non-participating’ trustees. This was part of the effort to manage conflicts of interest effectively. Despite some initial ambiguities in the roles of these trustees, the investigation found no evidence of unmanaged conflicts or actions against the interests of EV. Both trustees resigned during the inquiry.

The conclusion of the inquiry was largely positive, noting that the trustees acted “diligently and quickly” to assess and mitigate risks to the charity, taking appropriate actions to protect its assets and ensure its continued operation. The report acknowledged some governance weaknesses within the charity but recognized the trustees’ efforts to rectify these issues promptly.