Bahamas Rebounds From FTX Collapse: ‘Crypto Will Be Our Way Out’

Sam Bankman-Fried has chosen a slice of prime Bahamian real estate to build the new headquarters of fast-growing cryptocurrency exchange FTX, posing with a shovel alongside the Caribbean nation’s prime minister in sharing the huge potential for digital assets.

Just seven months later, FTX’s spectacular bankruptcy sent shock waves through an industry that promised to revolutionize finance and undermined the credibility of The Bahamas, which has put the cryptocurrency boom at the center of its economic strategy, as a jurisdiction that properly monitors digital asset businesses. .

“Crypto was going to be our way out. We could interact with the global economy in a way we couldn’t before,” said Stéphane Deleveaux of the Caribbean Blockchain Alliance from a seaside restaurant on the northern coast of the island group.

“A large part of my work has been destroyed – and that’s because of Sam Bankman-Fried.”

The collapse of FTX, once valued at $32 billion, left venture capital firms including Sequoia Capital with huge losses, along with potentially more than 1 million creditors. Many are ordinary investors, lured by the opportunity to make a quick profit. The waterfront area that would have been the headquarters of the FTX is now abandoned, covered in debris and overgrown hedges.

Bahamian Prime Minister Philip Davis tweeted after breaking ground on the site for Sam Bankman-Fried and the FTX headquarters © Philip Davis/Twitter

FTX was a newcomer to the Bahamas, having been established there more than a year ago after relocating from Hong Kong. The move was central to the Bahamas’ cryptocurrency as it sought to move away from offshore banking, which was largely entrenched in rival jurisdictions such as the Cayman Islands.

The Bahamas was “looking for other options and that’s where cryptocurrency came in,” said defense attorney Jack Blum, who serves as general counsel for the Tax Justice Network, an advocacy group.

It has proven successful and has helped spur the island nation’s wider investment in digital assets. Days before FTX’s collapse, rival exchange OKX announced that the Bahamas would become its new regional hub after receiving regulatory approval.

In the month that FTX founder Prime Minister Philip Davis broke ground, the company hosted a lavish cryptocurrency gathering in the country’s Baha Mar resort. The guest list was a who’s who of names that helped propel Bankman-Fried to the status of cryptocurrency standard bearer, including Bill Clinton and Tony Blair, as well as pop star Katy Perry and NFL legend Tom Brady.

Sam Bankman-Fried, right, former UK Prime Minister Tony Blair left and former US President Bill Clinton, center, held a lavish gathering at the Baha Mar resort © Trustnodes

“There have been big conferences before, but this was none of these,” Deleveaux said, noting that the cryptocurrency crowd is the country’s “golden children.” “Everything they did seemed incredibly professional,” he said.

Yet in Nassau, the capital city on New Providence Island, where financiers rub shoulders with tourists disembarking from one of the many cruise ships, the once-promising cryptocurrency scene has left no physical trace. That’s partly because Bankman-Fried and his partners ran FTX from their penthouse in Albany, an exclusive luxury resort in the island’s isolated southwest.

The dismantling of the FTX drew harsh attention to the Bahamas and those in power there. In an address to parliament last week, Davis defended the Bahamas Securities Commission, the country’s top watchdog, saying it “found no deficiencies” in the island nation’s regulatory approach.

However, Bankman-Fried’s successor at FTX, John Ray III, said he had never seen “such a complete failure of corporate control and such a complete lack of reliable financial information.” Sam Trabucco, once chief executive of FTX’s sister company Alameda Research, called the environment at the Albany penthouse, where work and leisure freely mix, “toxic.”

Now fast becoming the industry’s leading villain, Bankman-Fried has made repeated attempts to explain herself on social media, but remains out of the public eye. He did not return an interview request from the Financial Times.

Ordinary Bahamians were left baffled by the rapid turn of events. One local who works at the Baha Mar resort said he was “still trying to understand how something that was going so well could crash so quickly”.

John Christensen, an economist and offshore finance expert, spoke of how, in his view, FTX was given free rein to operate.

“[The authorities] ignore these things, good job, everything is going smoothly until it appears. If the prime minister does not see a big failure on his watch, then he is not doing his job.”

The desire to protect their reputation seems to have bled into the tight-knit communities of the Bahamas. Michael Pintard, leader of the main opposition Free National Movement, said it was “absolutely too early” to say what impact the Bahamas’ cryptocurrency regulation might have.

Several Bahamian law enforcement agencies declined to comment on FTX or its founder. The Bahamas Securities Commission declined a request for an interview.

Needing input on the FTX’s collapse, one Bahamian said the island nation has little appetite for public criticism of the authorities. “You can hurt the wrong person and you won’t even realize how it affects you and your business,” he said.

Christensen added: “If the regulator is seen to be too actively involved in trying to understand business models by looking at risks, that is seen as kind of ‘anti-business’.”

However, Clement Stanley, a taxi driver in the capital, fell out with the rulers of the Bahamas for not protecting the good name of the nation. According to him, the island group is “the crown of the Caribbean Sea.” . . we must protect this reputation at all costs. We are taught this from childhood.”

His concern was for ordinary Bahamians who, unlike Bankman-Fried, were never given a fair chance to succeed. Authorities are doing a lot of due diligence on the “little guy,” he said, but less so for new cryptocurrencies.

“I wish they’d give guys like me a chance,” he said.