On 28 March 2024, all eyes will be on a courtroom in New York City, where former cryptocurrency billionaire Sam Bankman-Fried will appear to be sentenced after a November 2023 conviction on seven counts of wire fraud and conspiracy to launder money. He faces up to 110 years in prison. Now snared in controversy, at its peak in early 2022, FTX was worth $32bn (£26.3bn). As the exchange went into freefall, Bankman-Fried funnelled customer deposits into his trading firm, Alameda Research, to prop up his own risky investments and fund a lavish lifestyle.
But Bankman-Fried, 32, has said his goal wasn't to enrich his own life through massive earnings – rather he wanted to do enormous good for billions of people. From his first job as a quantitative trader, to the founding of his crypto empire, Bankman-Fried has touted the benefits of the effective altruism movement. In short, he claimed he wanted to make as much money as possible so he could give it away and change the world for the better.
"Effective altruism is a philosophy that aims to do as much good as possible," explains Brian Berkey, associate professor of legal studies and business ethics at The Wharton School of the University of Pennsylvania, US. "It's how to help ensure people's time and resources are spent well in making the world a better place. Through empirical evidence, individuals can make more informed decisions over which charitable causes to support."
Effective altruism (EA) looks great on paper – but many experts say the philosophy can ignore the nuances of human behaviour. In some ways, they say Bankman-Fried is the ultimate cautionary tale of how the lofty goal to do good can quickly go bad.
Higher wages, higher impact
'Effective altruism' emerged in 2009 from the work of Oxford University philosophers William MacAskill and Toby Ord. Building upon Australian philosopher Peter Singer's framework for ethical decision-making, the pair sought to establish a data-driven, utilitarian-esque approach to charity giving, to help maximise the amount of positive impact a single person could have on the world. They also established Giving What We Can, whose members pledge to give at least 10% of their income to effective charities.
An early focus of EA, says Berkey, was the movement's collaboration with the Anti Malaria Foundation to donate money towards mosquito bed nets: a cheap solution to one of Sub-Saharan Africa's biggest killers. The program generated maximum gains for minimal costs. "Many resources put to charitable use are often done so inefficiently," he says. "Directing funds towards an unheralded charity that does 10,000-times as much good as a popular organisation that receives millions of dollars every year means achieving massive differences through the same resources."
Sam Bankman-Fried used his platform in part to espouse effective altruism (Credit: Getty Images)
Soon after, MacAskill co-founded 80,000 Hours, an effective altruism non-profit that conducts research on which careers have the largest positive social impact. It advocates for 'earning to give', the philosophy in which people purposely choose careers with higher earning potential in order to maximise charitable giving.
"When thinking of how to make the world a better place, many people may choose to work for a charity or in political activism," says Joshua Hobbs, lecturer and consultant in applied ethics at the University of Leeds, UK. "However, many effective altruists believe that rather than slog away in a soup kitchen, you can create a greater impact by working in say, investment banking, earn higher wages and donate greater sums to charity."
This approach stuck with a young, enterprising Bankman-Fried, who met MacAskill in 2013 while he was still a student at the Massachusetts Institute of Technology (MIT). MacAskill reportedly convinced the prodigious mathematician to maximise his impact by taking a high-paying finance job and giving his money away.
Bankman-Fried did. After graduating with a physics degree, he joined Wall Street high-frequency trading firm Jane Street Capital and began donating half his estimated $300,000 salary to charitable causes that included animal welfare organisations. In 2019, Bankman-Fried founded FTX, which quickly became one of the biggest cryptocurrency exchanges in the world. As the company's value climbed into the billions, its charity arm committed more than $160m to at least 110 non-profits by September 2022, including biotech start-ups, Covid-19 vaccine research and effective altruist-affiliated groups.
'A good PR win'
Bankman-Fried isn't the only tech billionaire who has backed effective altruism, whether financially or philosophically: Facebook co-founder Dustin Moskovitz is part of the community, giving away hundreds of millions of dollars to effective charities. Hobbs says the movement is a natural partner for Silicon Valley, given its long had a philanthropic streak – notably the Gates Foundation, which has self-reported charitable donations of more than $79bn (£64.7bn) since 2000.
"Effective altruism focuses on utility – maximising earning potential and giving huge sums away – and tech is the sphere of smart graduates who can genuinely earn boundless incomes," adds Hobbs. "For tech billionaires, effective altruism is a good PR win: it's a philosophy that says very smart, wealthy individuals are best placed to work out how their money is best spent, rather than radically redistributing their funds through progressive taxation."
Hobbs says EA's popularity in the tech industry can sometimes further billionaires' individual interests instead of the greater good. "The most high-profile effective altruists tend to be reasonably privileged white men, who aren't necessarily funnelling funds into political change or addressing power imbalances. It's not necessarily an accident that the effective-altruist approach has appealed to people like Bankman-Fried."
Many effective altruists believe that rather than slog away in a soup kitchen, you can create a greater impact by working in say, investment banking, earn higher wages and donate greater sums to charity – Joshua Hobbs
Despite criticism, effective altruism has had real results in some cases. By March 2022, Giving What We Can had raised more than $2.5bn in pledges, with $8.6m donated to the UK-based Against Malaria Foundation – enough to save approximately 2,000 lives, most of which are children under the age of five. Funds amounting to $3.7m have gone to Schistosomiasis Control Initiative and Deworm the World, enough to remove parasitic worms from 3.7m children.
Yet with its epicentre in places such as Oxford and Silicon Valley, Berkey says that in many cases, the focus of effective altruism has moved away from using hard evidence to address humanitarian crises in real time with simple philanthropic solutions. Instead, it has begun to favour advancing abstract and long-termist views, such as averting AI-driven catastrophe and nuclear war. "For future-focused tech billionaires, preventing runaway AI may seem more interesting than transferring huge amounts of wealth to poorer people on the other side of the world."
Prominent effective altruists, including MacAskill and Moskovitz, have denounced Bankman-Fried as they try to continue their work. But proponents of EA understand the implosion of FTX and Bankman-Fried's criminal proceedings have left a scar on the philosophy. "Either EA encouraged Sam's unethical behavior, or provided a convenient rationalization for such actions," tweeted Moskovitz in late 2022. "Either is bad."
Berkey, who also considers himself an effective altruist, describes Bankman-Fried as "an embarrassment". "What he did was terrible – but it wasn't unique or fundamental to effective altruism," he adds. "There are always people who seek to advance their own status through corrupt, self-serving and unethical actions while masquerading behind a large-scale movement advocating for social change."
Although there is power in the philosophy, Hobbs says EA is flawed in that the movement seeks change through those already in positions of power. "Effective altruism can underestimate the role of the environment in shaping a person's character and motivations," he says. "An effective-altruist investment banker still works with investment bankers who have very different priorities and viewpoints. There was perhaps naivete that a scenario like Bankman-Fried would never happen."
Indeed, as much as Bankman-Fried's FTX committed to charity, just a month after the exchange collapsed, it began trying to claw back donations. And, in a Twitter direct-message exchange with Vox journalist Kelsey Piper, shortly after FTX filed for bankruptcy, Bankman-Fried agreed his ethically driven approach was "mostly a front". "Some of this decade's greatest heroes will never be known," he wrote to Piper, "and some of its most beloved people are basically shams."