Sam Bankman-Fried selected a slice of prime Bahamas actual property to construct the brand new headquarters of his fast-growing cryptocurrency trade FTX, posing with a shovel alongside the Caribbean nation’s prime minister in a shared embrace of the large potential for digital property.
Simply seven months later, FTX’s spectacular collapse has despatched shockwaves via an business that promised to revolutionise finance, and shattered the credibility of the Bahamas — which put the crypto increase on the coronary heart of its financial technique — as a jurisdiction that correctly displays digital asset companies.
“Crypto was going to be our method out. We might work together with the worldwide economic system in a method we couldn’t earlier than,” mentioned Stefen Deleveaux, of the Caribbean Blockchain Alliance, from a seafront restaurant on the island group’s north coast.
“An enormous a part of my work has been destroyed — and that’s due to Sam Bankman-Fried.”
The collapse of FTX, as soon as valued at $32bn, has left enterprise capital companies together with Sequoia Capital nursing massive losses, together with doubtlessly greater than 1mn collectors. Many are bizarre buyers, lured in by the chance to make a fast revenue. The coastal web site that was to be FTX’s HQ now lies deserted, strewn with rubble and overgrown hedges.
FTX was a current arrival to the Bahamas, establishing there simply over a 12 months in the past after transferring from Hong Kong. This swap was central to the Bahamas’ crypto wager because it sought to diversify away from offshore banking, which largely has uprooted to rival jurisdictions such because the Cayman Islands.
The Bahamas “was searching for different choices, and right here got here crypto”, mentioned Jack Blum, a defence lawyer who serves as a senior adviser to the Tax Justice Community, an advocacy group.
It proved profitable, serving to spearhead the island nation’s push for broader digital asset funding. Simply days earlier than FTX collapsed, rival trade OKX introduced that the Bahamas could be its new regional hub after securing registration from its regulators.
In the identical month that FTX’s founder was breaking floor with prime minister Philip Davis, the corporate hosted a lavish crypto gathering on the nation’s Baha Mar resort. The visitor record was a “who’s who” record of names who helped propel Bankman-Fried to his standing as crypto’s flag bearer, together with Invoice Clinton and Tony Blair, in addition to pop star Katy Perry and NFL legend Tom Brady.
“There had been giant conferences earlier than, however this was past any of that,” Deleveaux recalled, noting how the crypto crowd have been the nation’s “golden youngsters”. “The whole lot they did appeared extremely skilled,” he mentioned.
But in Nassau, the capital located on New Windfall island, the place financiers rub shoulders with vacationers disembarking from one of many many cruise ships, a as soon as promising crypto scene has barely left a bodily footprint. That is partly as a result of Bankman-Fried and his associates ran FTX from his penthouse nestled in Albany, an unique luxurious resort within the remoted south-west of the island.
FTX’s unravelling has shone a harsh highlight on the Bahamas, and people in energy there who’ve sought to distance themselves from the fallout. Davis final week defended the Securities Fee of the Bahamas, the nation’s chief watchdog, in an tackle to parliament, saying he had “not recognized any deficiencies” within the island nation’s regulatory strategy.
But Bankman-Fried’s successor at FTX, John Ray III, mentioned he had by no means seen “such an entire failure of company controls and such an entire absence of reliable monetary data”. Sam Trabucco, the one-time co-chief government of FTX’s sister agency Alameda Analysis, described circumstances on the Albany penthouse, the place work and leisure combined freely, as “poisonous”.
Bankman-Fried, now quickly remodeled into the business’s main villain, has made repeated makes an attempt on social media to elucidate himself, however stays out of the general public eye. He didn’t return a request for an interview from the Monetary Occasions.
Bizarre Bahamians have been left reeling by the fast flip of occasions. One native who labored on the Baha Mar resort mentioned he was “nonetheless making an attempt to determine how one thing going so effectively might crash so rapidly”.
John Christensen, an economist and offshore finance specialist, was scathing over how FTX was given, in his view, free rein to function.
“[The authorities] flip a blind eye to those issues, it’s good enterprise, all of it seems to be going easily till it’s not. If the prime minister can’t see {that a} large failure has occurred on his watch, then he’s failing in his responsibility,” he mentioned.
The need to guard its repute appears to have bled into the Bahamas’ close-knit communities. Michael Pintard, chief of the Free Nationwide Motion, the primary opposition, mentioned it was “totally too early” to say what influence the Bahamas’ regulation of crypto may need.
A number of Bahamian regulation enforcement officers declined to touch upon FTX or its founder. The Securities Fee of the Bahamas declined a request for an interview.
One Bahamian, pressed for insights surrounding the FTX collapse, mentioned there was little urge for food on the island nation to criticise the authorities publicly. “You might upset the flawed individual and also you may not even realise how that impacts you and your corporation,” the individual mentioned.
Christensen added: “If the regulator is seen to be too actively engaged in making an attempt to grasp the enterprise fashions, wanting on the dangers, then that’s seen in some way as ‘anti-business’.”
But Clement Stanley, a taxi driver within the capital, took concern with those that run the Bahamas for not safeguarding the nation’s good identify. He mentioned the group of islands is the “crown jewel of the Caribbean . . . we have now to guard that repute in any respect prices. We’re taught that as children.”
His concern was for bizarre Bahamians, who in contrast to Bankman-Fried have been by no means given a good probability to succeed. The authorities do “a lot due diligence on ‘the little man’,” he famous, however a lot much less so for the brand new crypto incomers.
“I want they’d give guys like me an opportunity,” he mentioned.
