Special Interest

Gift to Metropolitan Museum of Art Rescinded as Cryptocurrency Firm Seeks to Recover Losses

New York Museum Forced to Return Donation from Bankrupt Crypto Company

The prestigious Metropolitan Museum of Art in New York City has been compelled to refund a donation made by the now-defunct cryptocurrency company FTX, as the firm’s new leadership attempts to recover assets to pay back creditors and investors. FTX, which filed for bankruptcy last year after experiencing a liquidity crisis, had pledged $20 million to the Met in cryptocurrency in 2021. However, with FTX now in bankruptcy proceedings, the donation has been rescinded at the request of the company’s lawyers.

This reversal of fortune for both FTX and the Met serves as an example of the volatility and uncertainty surrounding cryptocurrencies and blockchain technology. Just a year ago, the donation from the upstart FTX allowed the museum to claim it was embracing innovation and diversifying its contributor base. The Met even intended to put FTX’s name on a new wing. Now, the Met has egg on its face as it explains why it can no longer accept or keep the funds.

FTX’s Epic Rise and Sudden Collapse

FTX was founded in 2019 by Sam Bankman-Fried and quickly became one of the largest cryptocurrency exchanges in the world, with a multibillion dollar valuation. However, in late 2022 the company experienced a liquidity crunch when a large number of customers attempted to withdraw funds all at once. This bank run was exacerbated by growing skepticism regarding FTX’s balance sheet and financial practices.

Despite Bankman-Fried’s desperate efforts to raise emergency funds, FTX ended up filing for Chapter 11 bankruptcy protection in November 2022. The firm and its founder are now under investigation by state and federal authorities for allegedly mishandling customer deposits. The new FTX management is trying to scrounge up assets to pay back account holders and other creditors. Reclaiming the $20 million gift to the Met is one way they are attempting to make depositors whole.

Museum Donation Used to Enhance FTX’s Reputation

In 2021, the donation from FTX was trumpeted as marking the first time the Met had accepted cryptocurrency funding. The museum’s president stated at the time that FTX’s generosity represented “a significant addition to the Museum’s endowment.” Bankman-Fried also said the gift reflected his company’s “commitment to supporting the arts.”

But critics questioned the wisdom of associating the Met brand with the volatile cryptocurrency industry. They argued FTX was exploiting the museum’s sterling reputation to boost its own image and make risky crypto trading appear more mainstream. Now, unfortunately, those skeptics have been proven right, as the museum is linked to a collapsed company under federal investigation.

Relationship Sours as True Nature of FTX Emerges

The Met intended to name a section of its musical instrument galleries after FTX and its founder. Those plans are obviously on hold given the turn of events. The museum is also reportedly removing references on its website to FTX as a corporate partner. This unraveling of ties comes as the questionable financial engineering employed by FTX before its sudden failure has become more clear.

It remains to be seen whether the Met will institute more careful vetting of potential donors or if other nonprofits may hesitate to take cryptocurrency donations until the sector stabilizes. For now, the museum is left to mend fences with patrons who may be frustrated that such a vaunted institution got entangled with the ephemeral promises of crypto before the bubble burst.

Add Comment

Click here to post a comment