Bahamas reeling from FTX collapse: 'Crypto would be our way out'

Bahamas reeling from FTX collapse: ‘Crypto could be our means out’

Sam Bankman-Fried selected a bit of prime Bahamian actual property to construct the brand new headquarters for his fast-growing cryptocurrency change FTX, posing with a spade alongside the Caribbean nation’s prime minister in a joint embrace of the large potential of digital property.

Simply seven months later, FTX’s spectacular collapse has despatched shockwaves via an business that promised to revolutionize finance, shattering the Bahamas’ credibility — which places the crypto increase on the coronary heart of its financial technique — as a jurisdiction that correctly oversees digital asset corporations.

“Crypto was going to be our means out. We might work together with the worldwide financial system in a means we could not earlier than,” stated Stefen Deleveaux, of the Caribbean Blockchain Alliance, from a restaurant by the ocean within the capital, Nassau.

“A big a part of my work has been destroyed – and it’s due to Sam Bankman-Fried.”

The collapse of FTX, as soon as valued at $32 billion, has left enterprise capital corporations together with Sequoia Capital with heavy losses, together with doubtlessly greater than 1 million collectors. Many are abnormal buyers, attracted by the potential for making a fast revenue. The coastal website that was presupposed to be FTX’s headquarters now lies deserted, affected by rubble and overgrown hedges.

Bahamas Prime Minister Philip Davis tweets after he and Sam Bankman-Fried broke floor on the location of FTX headquarters © Philip Davis/Twitter

FTX not too long ago arrived within the Bahamas, one of many wealthiest Caribbean nations, establishing itself there simply over a yr in the past after shifting from Hong Kong. This shift was central to the Bahamas’ crypto enterprise because it sought to diversify away from offshore banking, which has largely moved to rival jurisdictions such because the Cayman Islands.

The Bahamas “was in search of different choices, and right here got here crypto,” stated Jack Blum, a protection legal professional who serves as senior counsel to the Tax Justice Community, an advocacy group.

It proved profitable and helped spearhead the island nation’s push for broader funding in digital property. Simply days earlier than FTX collapsed, rival change OKX introduced that the Bahamas would turn out to be its new regional hub after securing registration from its regulators.

In the identical month that FTX’s founder broke floor with Prime Minister Philip Davis, the corporate hosted a lavish crypto gathering on the nation’s Baha Mar resort. The visitor checklist was a who’s who of names that helped propel Bankman-Fried to his standing as crypto normal bearer, together with Invoice Clinton and Tony Blair, in addition to pop star Katy Perry and NFL legend Tom Brady.

Tony Blair, left, Bill Clinton, center, and Sam Bankman-Fried at an FTX event in the Bahamas in April 2022
Sam Bankman-Fried, proper, hosted a lavish gathering on the Baha Mar resort, attended by former British Prime Minister Tony Blair, left, and former US President Invoice Clinton, middle © Trustnodes

“There had been large conferences earlier than, however this was past all that,” recalled Deleveaux, noting how the crypto viewers was the nation’s “golden little one.” “Every thing they did appeared extremely skilled,” he stated.

However in Nassau, the capital of the island of New Windfall, the place financiers rub shoulders with vacationers disembarking from one of many many cruise ships, a once-promising crypto scene has barely left a bodily footprint. That is partly as a result of Bankman-Fried and his associates operated FTX from his penthouse nestled in Albany, an unique luxurious resort within the island’s remoted southwest.

FTX’s dissolution has solid a harsh highlight on the Bahamas and people in energy there who’ve tried to distance themselves from the fallout. Davis final week defended the Securities Fee of the Bahamas, the nation’s high watchdog, in a speech to parliament, saying he had “not recognized any deficiencies” within the island nation’s oversight method.

Nonetheless, Bankman-Fried’s successor at FTX, John Ray III, stated he had by no means seen “such an entire failure of company controls and such an entire absence of dependable monetary info.” Sam Trabucco, the previous co-head of FTX’s sister firm Alameda Analysis, described circumstances within the Albany penthouse, the place work and leisure mingle freely, as “poisonous.”

Bankman-Fried, who has now shortly become 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 an interview request from the Monetary Instances.

Abnormal Bahamians have been alarmed by the fast turnaround. A neighborhood who labored on the Baha Mar resort stated he was “nonetheless making an attempt to determine how one thing that is going so effectively might crash so shortly”.

John Christensen, an economist and offshore finance specialist, was dismayed at how, in his view, FTX was given free rein.

“[The authorities] shut your eyes to those issues, it is a whole lot, every thing appears to be going easily till it isn’t. If the Prime Minister can’t see {that a} huge failure has occurred on his watch, then he’s failing in his obligation, he stated.

The need to guard one’s status seems to have bled into the close-knit communities of the Bahamas. Michael Pintard, chief of the Free Nationwide Motion, the primary opposition, stated it was “means too early” to say what impression the Bahamas’ regulation of crypto might need.

A number of Bahamian legislation enforcement officers declined to touch upon FTX or its founders. The Bahamas Securities Fee declined a request for an interview.

One Bahamian, pressed for perception into the FTX collapse, stated there was little urge for food on the island nation to publicly criticize the authorities. “You possibly can upset the unsuitable individual and you could not even understand the way it impacts you and your small business,” the individual stated.

Christensen added: “If the regulator is seen to be too actively engaged in making an attempt to grasp the enterprise fashions and take a look at the dangers, then that’s seen as ‘anti-business’ indirectly.”

Nonetheless, Clement Stanley, a taxi driver within the capital, took concern with those that run the Bahamas for not upholding the nation’s good identify. He stated the group of islands is “the crown jewel of the Caribbean . . . we should defend that status in any respect prices. We study that as kids.”

His concern was for abnormal Bahamians, who, not like Bankman-Fried, have been by no means given a good probability to succeed. Authorities do “a lot due diligence on ‘the little man,'” he famous, however a lot much less on the brand new crypto entrants.

“I want they might give guys like me an opportunity,” he stated.

Video: Cryptocurrencies: How Regulators Misplaced Management

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