Original | Odaily Planet Daily (@OdailyChina)
Author｜jk
In November 2022, the collapse of FTX shocked the entire cryptocurrency world and left a lasting scar on the industry's trust. The world's second-largest exchange went bankrupt in just a few days, and its founder Sam Bankman-Fried (SBF) was sentenced to 25 years in prison for fraud, with $8 billion of customer funds missing, leaving creditors to suffer through a lengthy compensation process.
However, a recent event has continued the story of FTX, with the protagonist shifting from a trader to a lawyer, and the situation evolving from charitable donations to legal litigation. A case concerning a $650,000 charitable donation, narrated by Odaily Planet Daily:
The Beginning
The story begins in April 2022. At that time, FTX was thriving and aggressively hiring. Ross Rheingans-Yoo, a trader who had previously worked at the well-known quantitative trading firm Jane Street on Wall Street, was recruited by SBF to join the FTX Foundation as a project manager.
Like many other informal arrangements at FTX, Rheingans-Yoo's employment terms were not documented in a formal contract but were recorded 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 donations to charities of his choice.
This half cash, half charitable donation compensation structure reflected FTX and SBF's own belief in the effective altruism (EA) movement, which was also part of FTX's promotional strategy that year. (Effective altruism is a philosophy and social movement that advocates using reason and evidence to determine how to do the most good. SBF himself is a prominent figure in this movement, publicly stating that his purpose in entering the financial industry was to "make money to donate to charities.")
By September 2022, after about five months of work, SBF informed Rheingans-Yoo that as a bonus for the first half of 2022, he would receive $650,000 in cash, plus "an additional $650,000 directed grant to any effective altruism-driven charity of your choice."
Just two months later, in November 2022, FTX collapsed. At the time of bankruptcy, Rheingans-Yoo had not yet had the chance to inform FTX where to send that $650,000 charitable donation.
He’s here, he’s here, he’s coming with a claim
After the bankruptcy, Rheingans-Yoo filed several claims in bankruptcy court, including:
- $275,000 cash bonus balance (he claimed to have only received $375,000 of the $650,000)
- $650,000 directed charitable grant
- Other unpaid wages
After a lengthy legal process, the bankruptcy judge ultimately ruled that he was entitled to the $650,000. Since FTX's bankruptcy liquidation achieved a payout rate of over 100% for unsecured creditors, he received the full amount.
Rheingans-Yoo initially chose to donate this money to Manifold for Charity—the charitable branch of the prediction market platform Manifold Markets. This choice was not surprising, as Manifold has close ties to the effective altruism community, and Rheingans-Yoo himself served on the board of Manifold for Charity.
However, 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 the Manifold board presented a clear conflict of interest
- He would directly control the distribution of these funds, meaning that donating to this charity was equivalent to putting money directly into his own pocket
More importantly, FTX's lawyers argued that this arrangement perpetuated the core pattern of FTX's fraud: "FTX insiders extracting funds from creditors to donate to 'charities' to enhance personal reputations and profit acquaintances in effective altruism."
In response to the opposition, Rheingans-Yoo expressed a willingness to compromise, proposing to designate the donation to another effective altruism charity: 1DaySooner Inc.—an organization dedicated to promoting human challenge trials to accelerate vaccine development.
However, the law firm Sullivan & Cromwell, representing the FTX bankruptcy management team, rejected this change. Their reasoning was astonishing: the court's order only allowed distribution to "the Effective Altruism-driven charity," not "any Effective Altruism-driven charity."
In other words: because Rheingans-Yoo only had one opportunity to choose, and he made the wrong choice the first time, he could not select another charity.
Bloomberg's report ironically stated: “No lawyer can resist such an opportunity—‘Aha, if the document says “a,” you get $650,000, but it says “the,” so you don’t get it.’ This is the very essence of what lawyers live for.”
The Judge Was Not Buying It
In January 2025, during a hearing in Delaware bankruptcy court, Judge Karen B. Owens expressed strong dissatisfaction with the technical defenses presented by the FTX bankruptcy management team.
Judge Owens ruled that Rheingans-Yoo could re-designate the $650,000 to 1DaySooner Inc., as the FTX trust had "absolutely no credible basis" to oppose this change.
She further criticized the FTX management team's actions as "completely unreasonable, with no legal or factual basis," leading to "wasteful litigation."
"I believe the trust has been harmed, the claimant has been harmed, and the court has been harmed," Judge Owens stated during the hearing.
She also approved a motion for sanctions against the FTX trust, which is quite rare in bankruptcy cases.
However, the FTX bankruptcy management team did not relent. A week later, they filed an appeal, submitting the case to the Delaware federal district court to continue challenging this ruling.
The Shadow of $71.6 Million
To understand why the FTX bankruptcy management team was so fixated on this $650,000, one must understand their larger lawsuit against Rheingans-Yoo.
In July 2023, FTX filed a lawsuit against multiple defendants, including Rheingans-Yoo, seeking to recover $71.6 million in investments and donations. These funds flowed to six life sciences companies, including Lumen Bioscience, GreenLight Biosciences, and Riboscience, through the FTX Foundation and the Latona Biosciences Group led by Rheingans-Yoo between February and October 2022.
FTX's lawyers claimed:
- The Latona Biosciences Group was a "fake" nonprofit organization registered in the Bahamas
- These investments underwent no due diligence or independent valuation
- Their true purpose was to accumulate political capital and influence for SBF, rather than genuine charity
- These transfers were intended to hinder, delay, or defraud current 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 many years at the Future of Humanity Institute at Oxford University and Open Philanthropy, and was a significant contributor to the philosophy of "longtermism." When FTX collapsed, he collectively resigned with the entire Future Fund team, expressing "shock and extreme sadness" in his resignation statement.
Rheingans-Yoo firmly denied all allegations. He argued:
- He was not a member of SBF's "inner circle" and was unaware of FTX's fraudulent activities
- His work at Latona was entirely aimed at "bringing positive outcomes for society"
- Every investment was carefully analyzed and underwent due diligence
“Rheingans-Yoo is a loyal employee who found himself caught in a predicament he did not create,” his lawyer wrote in court documents.
From Charitable Machine to Lawyer ATM
In a sense, these two cases perfectly illustrate the past and present of FTX.
The story has concluded. But readers are invited to ponder, in this case, is the FTX bankruptcy liquidation team necessarily just?
As the opening comment of the article stated, before the bankruptcy, FTX was "a massive machine that funneled funds from crypto traders to effective altruism charities." The FTX Foundation claimed to have donated over $190 million before the collapse, with plans to donate $1 billion in 2022.
But after the bankruptcy, FTX became "a machine that funneled funds to lawyers." A protracted legal battle has unfolded around every charitable donation, every investment, and every commitment. The costs of these legal battles are nothing short of epic.
According to the latest court records, as of January 2025, the FTX bankruptcy case has incurred nearly $1 billion in legal and advisory fees—$948 million has been paid, and over $952 million has been court-approved. This makes FTX one of the most expensive bankruptcy cases in the U.S. since Lehman Brothers ($6 billion), with costs exceeding the total of all other cryptocurrency bankruptcy cases, including Celsius, BlockFi, Genesis, and Voyager ($502 million).
The main law firm Sullivan & Cromwell alone has charged over $248 million, with partner hourly rates reaching $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 10,000 RMB an hour from a bankruptcy case, would you want this case to end quickly or slowly?
Ironically, at some point at the end of 2023, the legal fee bill ($1.45 billion) even exceeded the actual losses of the clients ($1.422 billion). On a daily basis, FTX was paying about $1.4 million to lawyers and consultants during the peak of the bankruptcy, which is about $53,000 per hour. Critics pointed out that FTX had only 200 employees and operated for just 3 years, while Enron had 20,000 employees, committed fraud for 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 scale. This lawsuit concerning $650,000 and $71.6 million is a microcosm of this "lawyer ATM" continuously in operation.
Remember, all this money is coming from the accounts of the company after the FTX collapse.
And FTX is no longer around, so who is going to oversee how much this dead giant has to pay the lawyers?
In other words, while the harmed clients received 100% compensation, the profits from Bitcoin rising from $16,000 to $100,000 and Solana from $20 to $200 are all gone. A significant portion of these profits has ended up in the lawyers' pockets.
Now do you understand why lawyers engage in "wasteful litigation"?
Dustin Moskovitz, co-founder of Facebook and a major funder of the effective altruism movement, questioned on Twitter after the FTX 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 filed an appeal (once again, why is that?) The $650,000 donation case will continue to be heard in federal district court. The $71.6 million lawsuit is also ongoing. The cases mentioned earlier are a reflection of the chaos following FTX's bankruptcy.
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 the fraud? Will the $650,000 eventually reach 1DaySooner's account smoothly? Odaily will continue to provide updates on this story.
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