Edit January 19: FLI has made a substantive statement about this issue:
https://futureoflife.org/rejection_statement/
This seems concerning. It is claimed that the Future of Life Institute, run by MIT professor Max Tegmark, offered but did not pay out a grant to a Swedish far-right foundation. The character of this foundation and its associates is well-known in Sweden. Expo is an old and respected watchdog organization specialized on neo-nazism and related movements.
https://expo.se/2023/01/elon-musk-funded-nonprofit-run-mit-professor-offered-finance-swedish-pro-nazi-group
I think this would be a lot more than "mildly embarassing". It's an effective altruism organisation. They should not have had to wait for the "due diligence" phase to understand why donating a hundred grand to a far-right newspaper is not an effective cause.
Either someone is approving grants (and telling the grantees they have funding) without so much as doing a cursory google search on the grantees, or someone knew it was a nazi newspaper and still thought it was a worthy effective cause. It really doesn't help the case that Tegmarcks brother apparently wrote stories for the newspaper in question, so he at least could be expected to know what it is.
If the letter is genuine (and they have never denied that it is), then someone at FLI is either grossly incompetent or malicious. They need to address this ASAP.