Cryptofinance: Following in the footsteps of Sam Bankman-Fried in the Bahamas

Welcome to this week's FT Cryptofinance newsletter, coming to you from the Bahamas, where I spoke to people about FTX.

FTX was the big fish brought in by the Bahamas as it sought to become a leading digital asset market in the heart of the Caribbean.

The plan was embodied by FTX's blowout conference in April, which featured Bahamian Prime Minister Philip Davis, Tony Blair, Bill Clinton, Katy Perry and NFL star Tom Brady, as well as supermodel Gisele Bündchen (then still together).

After Sam Bankman-Fried's crypto empire exploded, a thick fog of silence has descended on the island, as I discovered during my stay here this week.

For the Prime Minister, FTX's collapse is a serious challenge as he viewed his 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 boy hiding in Albany,” a taxi driver told me.

Albany is a luxury resort community co-owned by Tiger Woods, Ernie Els, Justin Timberlake and Joe Lewis, the British entrepreneur.

A local told me that Albany is an “island within an island,” a place where members can live their entire lives and almost never have to leave. There is even a high school for children. A 600-acre community, the mystery lies far beyond what the eye can see, even if, like me, you're 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," the guard said.

“FTX went to Albany because they wanted privacy, and they knew Albany offered exactly that,” one local told me. "Dubai is where people go to show off their money. Albany is where people go to keep it secret."

This is secret in a non-intrusive sense rather than a nefarious one. Still, it works like a charm when a storm hits. Repeated attempts to get behind Albany's doors were unsuccessful. Non-member passes were once on sale, but an Albany employee told me they are no longer available. A motorist leaving the property made no comments to the press; in his haste to leave he almost ran over my foot. Another employee told me curtly: “Albany operates on a confidential basis.”

Stefen Deleveaux, executive director of the Caribbean Blockchain Alliance, said at the lunch 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 condominium that's trying to avoid the spotlight. Over at Baha Mar, the luxury resort for this era-defining conference, the vast majority of employees told me they were not at liberty to discuss FTX or its disgraced former CEO.

But one worker – who I found at FTX’s conference center – told me “everyone was excited” when the crypto kings came to town.

The jazz club, I was told, was one of the FTX crew's favorites. But when push came to shove, Baha Mar also pulled the drawbridge.

“No one will tell you about anything,” a receptionist told me. I pushed for an interview with the manager, they said, "You want an honest answer? My manager asked me to tell you at Google."

The fact is that the Bahamas is a small place, and most people are simply not willing 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 rejected. “People don’t want to subject themselves to unwanted public scrutiny,” one Bahamian told me.

While some rush to avoid uncomfortable questions, in the palm trees and clear-water beaches that surround the island, ordinary people lose out. A taxi driver told me that Bahamians were disappointed by FTX's collapse 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 would house the exchange's future headquarters on the island.

But despite the wall of silence, I would be remiss not to mention the scene at the Nassau airport, which was inexplicably still advertising FTX when I arrived. As one dismayed couple remarked at passport control, “The first thing they tell you is to trust FTX!”

Any tips for me while I'm in the Bahamas? Email me at scott.chipolina@ft.com.

Join me at the FTsCrypto and Digital Assets Summit: Winter Editionon November 28th, where FT colleagues and I will discuss where regulation is going. It includes appearances by CFTC Chairman Rostin Behnam and Esma Chairman Verena Ross. As an FT Premium subscriber, you can use promo code PREMIUM2022 to watch digitally for free or use FT25 to get 25% off your personal pass.

What we discovered

• Every capital city has a cafe or restaurant frequented by the most powerful people in the country. In Nassau, that's Café Matisse, and it proved worth a visit during my stay. One lawmaker told me that the Bahamas would not let Bankman-Fried go anywhere “until the U.S. decides what it wants to do.”

• My colleague Madison Darbyshire suggested that I delve into a popular Bahamian food delivery app called Kraven. I asked the driver if the FTX crew ever used the service and was told they usually ordered about $500 worth of food a pop. 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 few companies cite “unprecedented market conditions” when they are doing well.

• The new FTX boss John Ray III hit 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 trustworthy financial information." And this is the man who oversaw the liquidation of Enron!

• Finally, my colleague Hannah Murphy recently had lunch with the introverted Coinbase CEO Brian Armstrong in San Francisco. Here's the report on how it went.

Soundbite of the Week: Philip Davis, Prime Minister of the Bahamas

On Wednesday, Prime Minister Davis told his country's parliament that Bahamian regulators unfortunately could not have prevented FTX's collapse.

“Based on our analysis and understanding of the FTX liquidity crisis to date, we have not identified any deficiencies in our regulatory framework that could have prevented 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 huge summer crash.

Data from CryptoCompare shows how much of the industry's flagship cryptocurrency has flowed out of some of the biggest exchanges so far this month. From what we hear, some companies are trading over-the-counter and some investors are selling their holdings. Others are simply HODLing for better times.