Sam Bankman-Fried chose a slice of prime real estate in the Bahamas to build the new headquarters of his fast-growing cryptocurrency exchange FTX, posing with a shovel alongside the Prime Minister of the Caribbean country in a shared embrace of the enormous potential of digital assets.
Just seven months later, the spectacular collapse of FTX sent shockwaves through an industry that promised to revolutionize finance and shattered the credibility of the Bahamas — which has placed the crypto boom at the heart of its economic strategy — as a jurisdiction that properly oversees digital asset businesses.
“Crypto was going to be our way out. We could interact with the global economy in a way that we couldn’t before,” said Stefen Deleveaux, of the Caribbean Blockchain Alliance, from a beachfront restaurant on the island group’s north coast.
“A lot of my work got destroyed – and that’s because of Sam Bankman-Fried.”
The collapse of FTX, once valued at $32 billion, has left venture capital firms including Sequoia Capital with heavy losses, along with potentially more than a million creditors. Many are ordinary investors, attracted by the possibility of making a quick profit. The coastal site that was to be FTX HQ is now abandoned, littered with rubble and overgrown hedges.
FTX recently arrived in the Bahamas, having moved there just over a year ago after leaving Hong Kong. This change was at the heart of the Bahamas crypto bet, as it sought to diversify away from offshore banks, which have largely moved to rival jurisdictions such as the Cayman Islands.
The Bahamas was “looking for other options, and here comes the crypto,” said Jack Blum, a defense attorney who serves as a senior adviser to the Tax Justice Network, an advocacy group.
It has proven successful, helping to lead the island nation’s push for broader investment in digital assets. Just days before FTX collapsed, rival exchange OKX announced the Bahamas as its new regional hub after securing registration from its regulators.
In the same month that the FTX founder inaugurated the land with Prime Minister Philip Davis, the company hosted a lavish crypto gathering in the resort town of Baha Mar. The guest list was a list of names that helped propel Bankman-Fried to his status as a crypto standard bearer, including Bill Clinton and Tony Blair, as well as pop star Katy Perry and NFL legend Tom Brady.
“There had been big conferences before, but this was beyond all that,” Deleveaux recalled, noting how the crypto crowd was the “golden children” of the country. “Everything they did seemed incredibly professional,” he said.
Yet in Nassau, the capital on the island of New Providence, where financiers rub shoulders with tourists disembarking from one of the many cruise ships, a once-promising crypto scene has left little physical footprint. That’s partly because Bankman-Fried and his associates ran FTX from their penthouse nestled in Albany, an exclusive luxury resort in the island’s secluded southwest.
FTX’s denouement shone a spotlight on the Bahamas and those in power there who sought to distance themselves from the fallout. Davis last week defended the Bahamas Securities Commission, the country’s top watchdog, in a speech to parliament, saying he had “not identified any shortcomings” in the island nation’s regulatory approach.
Yet Bankman-Fried’s successor at FTX, John Ray III, said he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.” Sam Trabucco, former co-chief executive of FTX’s sister company Alameda Research, described conditions at the Albany penthouse, where work and play mixed freely, as “toxic.”
Bankman-Fried, now quickly transformed into the industry’s main villain, has made repeated attempts on social media to explain himself but remains out of the public eye. He did not return an interview request to the Financial Times.
Ordinary Bahamians have been shaken by the rapid turn of events. A local who worked at the Baha Mar resort said he was “always trying to figure out how something that was going so well could fall apart so quickly”.
John Christensen, an economist and specialist in offshore finance, was scathing about how FTX had, in his view, carte blanche to operate.
“[The authorities] condoning these things is good business, everything seems to be fine until it’s not. If the Prime Minister cannot see that a massive failure has occurred under his leadership, then he is failing in his duty,” he said.
The desire to protect his reputation seems to have bled in the close-knit communities of the Bahamas. Michael Pintard, leader of the main opposition Free National Movement, said it was “totally too early” to say what impact Bahamian crypto regulations might have.
Several Bahamian law enforcement officials declined to comment on FTX or its founder. The Bahamas Securities Commission declined a request for an interview.
A Bahamian, pressed for information on FTX’s collapse, said the island nation was unwilling to publicly criticize the authorities. “You might upset the wrong person and you might not even realize how much it’s affecting you and your business,” the person said.
Christensen added: “If the regulator is perceived to be too actively engaged in trying to understand business models, looking at risks, then that is somehow seen as ‘anti-business’.”
Yet Clement Stanley, a taxi driver in the capital, criticized those running the Bahamas for failing to uphold the nation’s reputation. He said the island group is the “crown jewel of the Caribbean”. . . we must protect this reputation at all costs. We are taught this when we were children.
His concern was for ordinary Bahamians, who, unlike Bankman-Fried, never had a fair chance at success. Authorities do “so much due diligence on ‘the little guy,'” he noted, but much less for new crypto entrants.
“I wish they would give guys like me a chance,” he said.