Late in 2014, Nicholas Woodman, the founder and chief executive of GoPro, announced what appeared to be an extraordinary act of generosity.

Woodman, then 39, had just taken his camera company public and was suddenly worth about $3 billion. Now he was giving away much of that wealth — some $500 million worth of GoPro stock — to the Silicon Valley Community Foundation, an organization based in Mountain View, California, that would house the assets of the newly formed Jill and Nicholas Woodman Foundation.

“We wake up every morning grateful for the opportunities life has given us,” Woodman and his wife said in a statement at the time. “We hope to return the favor as best we can.”

The executive basked in prestige and gratitude. The Chronicle of Philanthropy named Woodman one of “America’s most generous donors” that year, placing him alongside established philanthropists like Bill and Melinda Gates and Michael Bloomberg.

But four years on, there is almost no trace of the Woodman Foundation, or that $500 million. The foundation has no website and has not listed its areas of focus, and it is not known what — if any — significant grants it has made to nonprofits. An extensive search of public records turned up just one beneficiary: the Bonny Doon Art, Wine and Brew Festival, a benefit for an elementary school in California.

Instead, the Woodman Foundation essentially exists as an account within the Silicon Valley Community Foundation, which is not required to disclose details about how, if at all, individual donors spend their charitable dollars. Woodman, GoPro and the Silicon Valley Community Foundation all declined to discuss the Woodman Foundation.

If the benefit to the needy is difficult to see, the benefit to Woodman is clear. After GoPro’s initial public offering, he faced an enormous tax bill in 2014. But by donating via the Silicon Valley Community Foundation, he eased his tax burden in two ways. First, Woodman avoided paying capital gains taxes on that $500 million worth of stock, a figure that most likely would have been in the tens of millions of dollars. He was also able to claim a charitable deduction that most likely saved millions of dollars more and probably reduced his personal tax bill for years to come.

Woodman achieved this enticing combination of tax efficiency and secrecy by using a donor-advised fund — a sort of charitable checking account with serious tax benefits and little or no accountability.

Donor-advised funds, or DAFs, allow wealthy individuals like Woodman to give assets — usually cash and stock but also real estate, art and cryptocurrencies — to a sponsoring organization like the Silicon Valley Community Foundation, Fidelity Charitable or Vanguard Charitable. But while donors part ways with their money, they don’t give up control. The sponsoring organizations make grants to hospitals, schools and the like only at a donor’s request. So while donors enjoy immediate tax benefits, charities can wait for funds indefinitely, and maybe forever.

For these reasons and more, DAFs have become one of the most controversial issues in the charitable world.

Proponents say DAFs have democratized giving, because they are simple to create and the individuals who use them are more generous than those who establish family foundations. “It’s a win-win,” said Greg Avis, interim president of the Silicon Valley Community Foundation. “The donor has a tax benefit, and the beneficiaries are the nonprofits.”

But to critics, DAFs represent the worst of philanthropy today — a system of guaranteed perks for the rich and uncertainty for the rest.

Unlike family foundations, which are required to distribute 5 percent of their assets each year and have historically been the way wealthy donors disbursed their philanthropic firepower, DAFs have no distribution requirements, meaning that billions of dollars earmarked for charity can sit idle for decades. And because organizations that manage DAFs are not required to report which funds give money to which causes, it is impossible to know how much money individual donors are giving to nonprofit organizations.

Their rise is also part of a broader move by the wealthy and powerful to shield much of their giving from public scrutiny. Just last month, after lobbying by conservative groups and donors, the Trump administration said it would stop requiring certain nonprofit organizations to disclose the names of large donors, a change that will make it easier for some political groups to hide their funders. And many conservative donors, including the Mercer family, have used DAFs to obscure their political activity. “The world of philanthropy is becoming less transparent, and that’s not a good thing,” David Callahan, author of “The Givers,” a 2017 book about big philanthropy, wrote in a recent essay. “Recent years have seen the rapid growth of a shadow giving system that funnels billions of dollars in gifts in ways that leave no fingerprints.”

That DAFs have become so popular with Silicon Valley billionaires has only added to their intrigue. Society is still reckoning with the dark sides of social media and online privacy, and there is concern that DAFs — a dream vehicle for the overnight wealthy — may prove to be another instance of techno-optimists disrupting a system with unintended consequences.

“They’re a fraud on the American taxpayer,” said Ed Kleinbard, a tax professor at the University of Southern California. “They’re a way for the affluent to have their cake and eat it, too.”

‘Playing Timing Games’

Donor-advised funds in their current form have been around since 1991 and drew light attention from Congress in 2006. But lately their popularity has surged. Contributions grew 15 percent in 2016, according to The Chronicle of Philanthropy, and the accounts now contain upward of $85 billion, according to the National Philanthropic Trust, a public charity that manages DAFs. Fidelity Charitable, the largest manager of DAFs, is now the biggest recipient of donations from the public — receiving more money than the United Way or the Salvation Army. In 2017 alone, DAFs managed by Fidelity Charitable received contributions from more than 30,000 new donors.

Nowhere has the growth been more startling than in Silicon Valley. Among the billionaires who have established DAFs just at the Silicon Valley Community Foundation are Facebook’s Mark Zuckerberg, Netflix’s Reed Hastings, Twitter’s Jack Dorsey, Google’s Sergey Brin, WhatsApp’s Jan Koum and Brian Acton, and Microsoft’s Paul Allen.

Approaching the Silicon Valley Community Foundation after a tech windfall has become a familiar pattern. In December 2012, just months after Facebook went public, Zuckerberg donated $500 million of Facebook shares to the group. In 2014, soon after Facebook acquired WhatsApp for $19 billion, Koum and Acton donated a combined $846 million to the foundation. In both cases, the establishment of DAFs allowed the men to reap a substantial tax advantage just when they needed it most.

Some of this money is put to swift use. Zuckerberg has used his DAF to give away tens of millions to schools and hospitals in the San Francisco area. Hastings has used his DAF to give to the Hispanic Foundation of Silicon Valley and the United Negro College Fund. In each case, the donors voluntarily publicized their gifts.

Organizations that manage DAFs say most of their account holders, anonymous though they may be, are similarly generous. The Silicon Valley Community Foundation distributed $1.3 billion during the last fiscal year to groups including the South San Francisco Unified School District and the San Francisco Museum of Modern Art. Schwab Charitable, another big sponsor of DAFs, said it distributed nearly $2 billion during the last fiscal year, making some 420,000 grants to nonprofits including Feeding America, the American Red Cross and Planned Parenthood.

“I’m mystified by the detractors,” said Pamela Norley, the president of Fidelity Charitable, which made DAF grants worth some $4.5 billion during the 2017 fiscal year. “The money is not just sitting there. It’s getting out the door in huge volumes.”

Yet in the case of Woodman, there is reason to question how much money was made available for charity. He established his DAF the day after GoPro stock approached its highest-ever price, about $95 per share. From a financial perspective, Woodman could not have timed his gift more perfectly.

News of his donation sent GoPro shares tumbling as much as 14 percent the next day, as investors interpreted the move as a lack of confidence in the stock. By the end of the year, GoPro had lost more than a third of its value. By the end of 2015, the stock traded near $18 a share. Today, GoPro stock is worth less than $6 a share.

As GoPro shares plummeted, the Silicon Valley Community Foundation held on to the stock, refraining from diversifying until “later in 2015,” according to Woodman, who briefly discussed his DAF in 2016 during an “Ask Me Anything” conversation on the website Reddit. While investors suffered steep losses, and the value of Woodman’s DAF likely shrank precipitously, his tax savings were pegged to the shares’ all-time high.

“Smart donors have been playing timing games with the charitable deduction for a long time,” said Roger Colinvaux, a tax professor at the Catholic University of America’s Columbus School of Law. “In this case, he potentially gets a very large deduction and gives nothing away. That’s a disturbing public policy issue.” On Reddit, Woodman suggested that his wealth was reaching charities: “The Foundation has gone on to fund causes supporting women and children and will continue to do so!!!!” Just how much money has gone to which organizations, of course, remains a mystery.

Wall Street Fees

When it comes to DAFs, the U.S. tax code rewards the promise of good intentions. Wealthy donors — including many of the Silicon Valley billionaires who have asked the public to trust them with their digital lives — pledge to distribute their funds to charity once they get their tax break. But in the absence of rules requiring donors to give their money away, it is hard to know what public good comes in exchange for those lucrative write-offs.

Skeptics see a system ripe for abuse. Donors might wait years to engage in meaningful philanthropic activity or decide to simply leave the fund for their children to manage.

“We’ve put this rule in place that says you get maximum tax benefits when you make a donation,” said Ray Madoff, a professor at the Boston College Law School and a vocal critic of donor-advised funds. “But you don’t have to do anything with it.”

Norley of Fidelity Charitable argues that on balance, account holders are generous. At her organization, roughly a quarter of the assets held in DAFs have been distributed to nonprofits in each of the past two years. Other sponsor organizations report similar distribution rates.

Yet such statistics can be skewed. In many instances, these figures include transfers from one DAF to another. In the most recent fiscal year, for instance, Vanguard Charitable sent more than $15 million from its DAFs to Fidelity Charitable. Sponsor organizations say this is simply a matter of wealthy donors adjusting their accounts. But it also creates the illusion of meaningful philanthropic activity where there is none.

And while the overall payout rate at an organization that manages DAFs may be substantial, the numbers could be warped by a few donors who give away huge sums, while a majority of donors give away virtually nothing.

Critics argue that some sponsor organizations even have an incentive to keep funds undisbursed to charities. That is because DAFs have emerged as a lucrative source of revenue for financial firms. For example, Fidelity Charitable, which is structured as an independent public charity, pays millions in annual fees to Fidelity Management, the big asset manager. Fidelity Management then invests the billions of dollars held in Fidelity Charitable’s DAFs, making money there as well. Vanguard, Schwab and Goldman Sachs all get millions in fees from their affiliated public charities. The more money held in DAFs, the greater the potential earnings for the financial groups.

The fact that DAFs have become a profit center for Wall Street firms is a perversion of the philanthropic system, critics say.

“The charitable deduction is not meant to give tax breaks to very wealthy people. It’s meant to encourage giving to worthy nonprofit organizations,” said Dean Zerbe, an attorney who worked for Sen. Charles Grassley, R-Iowa, when Grassley was chairman of the Finance Committee. “What you’ve got instead is a huge warehousing of funds with massive amount of fees being extracted by Wall Street.”

Fidelity and Goldman brush off such criticism as misinformed, arguing that they are simply providing a valuable service to their clients by streamlining their charitable giving and offering them legal tax benefits. Some DAF sponsors have rules in place that require accounts to disburse at least some money every few years.

“It’s not a bad thing,” said Karey Dye, president of the Goldman Sachs Philanthropy Fund, where Laurene Powell Jobs and former Microsoft chief executive Steve Ballmer recently established DAFs. “People have irrevocably given money away to charity. Most often they are wanting to give money away to things that are meaningful to them and make a difference.”

A Philanthropic Arms Race

At the Silicon Valley Community Foundation, the drive to accumulate assets appears to have been particularly intense. Former and current employees said the former chief executive, Emmett Carson, wanted to make the organization one of the largest sponsors of DAFs in the country and engaged in an arms race of sorts to woo big donors.

The employees said this led Carson to turn a blind eye to misbehavior from his top fundraiser, who was allegedly verbally abusive to colleagues. That scandal burst into public view this year, resulting in the departure of several top executives, including Carson, and prompted a re-examination of the rise of DAFs in the philanthropic community.

In spite of his ouster, Carson appears to have succeeded in his goal. Thanks to big gifts from tech billionaires like Woodman and Zuckerberg — and the relatively new practice of accepting highly volatile cryptocurrencies like Bitcoin and Ether — the Silicon Valley Community Foundation is one of the largest such groups in the country, with more than $13 billion in assets.

In the last fiscal year alone, that figure leapt by some $4.5 billion. Most of that, according to a recent audit released by the foundation, was the result of the soaring value of cryptocurrencies.

Congress and the IRS have recently requested public feedback about possible legal reforms to charitable organizations, including DAFs. In response, Madoff and Colinvaux wrote a letter to the Senate Finance Committee calling for changes that would include establishing a payout period for DAFs, and other measures they say would improve accountability.

Several philanthropic trade groups quickly sent their own letter to the committee. “There doesn’t seem to be a public-policy problem requiring urgent action,” the groups argued. Instead, they proposed that Congress “acknowledge the self-policing work of the sector by continuing to work with us and other practitioners to write legislation that reflects the realities of philanthropic work.”

It wouldn’t be the first time that Washington has tried to take action. The Pension Protection Act, passed in 2006, was the first law to specifically address DAFs. It established some basic rules that barred self-dealing but stopped short of more fundamental changes, such as mandated distribution requirements or less generous tax breaks.

“We were basically trying to undo a giveaway by the government,” said Zerbe, who worked on that bill while he was at the Senate Finance Committee. “But I’m never convinced we can totally keep the weasels down the hole.”