Welcome to this week’s FT Cryptofinance newsletter, coming to you from the Bahamas where I’ve been talking to people about FTX.
FTX was the big fish the Bahamas reeled in as it sought to become a leading market for digital assets in the heart of the Caribbean.
The plan was epitomized by FTX’s blowout conference in April, with appearances from Bahamian Prime Minister Philip Davis, Tony Blair, Bill Clinton, Katy Perry and NFL star Tom Brady and supermodel Gisele Bündchen (then still together).
Now that Sam Bankman-Fried’s crypto empire has exploded, a stifling fog of silence has settled over the island, as I’ve discovered during my stay here this week.
For the prime minister, the FTX’s collapse is a serious challenge as he saw its presence on the island as part of the country’s recovery from Hurricane Dorian in 2019 and the Covid-19 pandemic. As for Bankman-Fried, some say he kept to himself. “He’s just a little kid hiding out in Albany,” a taxi driver told me.
Albany is a luxury resort jointly owned by Tiger Woods, Ernie Els, Justin Timberlake and Joe Lewis, the British entrepreneur.
One local told me that Albany is an “island within an island,” a place where members can live their entire lives, hardly ever having to leave. There is even a secondary school for children. A 600-hectare community, the mystery lies far beyond what the eye can see, even if you – like me – are curious enough to show up unannounced at the security gates.
“I’m sorry you came all the way from London, but I can’t give you any information,” said the guard.
“FTX went to Albany because they wanted privacy, and they knew that’s what Albany offered,” one local told me. “Dubai is where people go to show off their money. Albany is where people go to keep it a secret.”
It is secret in a non-colloquial sense rather than a nefarious one. Still, it works like a charm when a storm hits. Repeated attempts to get behind Albany’s doors have been unsuccessful. Non-member cards were once on sale but an Albany employee told me none are available now. A motorist leaving the yard would not comment to the press; in his haste to leave he almost ran over my foot. Another employee told me curtly that: “Albany operates on confidentiality.”
Stefen Deleveaux, executive director of the Caribbean Blockchain Alliance, said during the luncheon that people “just don’t really think about Albany”. “We won’t have the money to live there, I never really thought about it until this week.”
It’s not just Bankman-Fried’s gated community that tries to avoid the limelight. Over at Baha Mar, the luxury resort for the time-defining conference, the vast majority of staff told me they were not at liberty to discuss FTX or its disgraced former chief executive.
But one worker—whom I found at the conference center FTX was using—told me that “everyone was excited” when the crypto kings came to town.
The jazz club, I’m told, was a favorite of the FTX crew. But when push came to shove, Baha Mar also pulled the drawbridge.
“No one is going to tell you anything about anything,” a front desk employee told me. I pressed for an interview with the manager, they said, “You want an honest answer? My manager told me to tell you to Google it.”
The fact is, the Bahamas is a small place, and most people are simply unwilling to stick their necks out on “sensitive” issues like this. Not even the government: I have repeatedly asked for an interview with the Prime Minister but my requests have been denied. “People don’t want to expose themselves to unwanted public scrutiny,” one Bahamian told me.
While some run to avoid awkward questions, it’s ordinary people who lose out on the palm trees and clear water beaches that surround the island. A taxi driver told me that the Bahamas is disappointed by the collapse of FTX because its arrival promised “good things” – like jobs for the economy.
As our video shows, FTX’s collapse could never be better symbolized than by the desolate and overgrown site that was supposed to house the exchange’s future marquee office on the island.
But despite the wall of silence, I’d be remiss not to mention the scene at Nassau Airport, which was still inexplicably showing ads for FTX when I arrived. As one dismayed couple at passport control noted, “The first thing they tell you to do is trust FTX!”
Any tips for me when I’m in the Bahamas? Email me at email@example.com.
Join me on the FT’s Crypto and Digital Assets Summit: Winter Edition on 28 November where FT colleagues and I discuss where regulation is heading. It includes appearances by CFTC chair Rostin Behnam and Esma chair Verena Ross. As a premium FT subscriber, you can use promo code PREMIUM2022 to watch digitally for free, or use FT25 to get 25% off your personal pass.
What we saw
Every capital city has a cafe or restaurant frequented by the country’s most powerful people. In Nassau there is Café Matisse, and it proved worth a visit during my stay. One member of parliament told me that the Bahamas is not letting Bankman-Fried go anywhere “until the US decides what it wants to do”.
My colleague Madison Darbyshire suggested I dig into a popular Bahamian food delivery app called Kraven. I asked the driver if the FTX team ever used the service and was told that they usually order around $500 worth of food. Maybe Albany’s restaurants weren’t up to FTX’s standards.
The FTX collapse continues to roll through the market. Genesis halted withdrawals from its platform, blaming “unprecedented market conditions”. Funny how so few companies cite “unprecedented market conditions” when they’re doing well.
New FTX boss John Ray III poured into FTX with ferocity. In a US court filing, Ray said he had never seen “such a complete failure of corporate controls and such a complete absence of reliable financial information”. And this is the man who oversaw the liquidation of Enron!
And finally, my colleague Hannah Murphy recently had lunch with the introverted CEO of Coinbase Brian Armstrong in San Francisco. Here is the account of how it went.
This week’s soundbite: Philip Davis, Prime Minister of the Bahamas
On Wednesday, Prime Minister Davis told his country’s parliament that, unfortunately, Bahamian regulators could not have stopped FTX’s collapse.
“Based on the analysis and understanding of the FTX liquidity crisis to date, we have not identified any deficiencies in our regulatory framework that could have avoided this.”
Let’s see if other authorities come to a similar conclusion.
Data mining: Fear and loathing
FTX’s stunning collapse has further eroded confidence in the fragile crypto industry, where markets are still reeling from a massive crash over the summer.
Data from CryptoCompare indicates how much of the industry’s flagship cryptocurrency has flowed out of some of the biggest exchanges so far this month. From what we have heard, some companies are trading off-exchange and some investors are selling down their holdings. Others simply yearn for better times.
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