Welcome to this week’s FT Cryptofinance newsletter, which comes to you from The Bahamas where I have been talking to people about FTX.
FTX was the big fish that The Bahamas reeled in as it sought to become a leading digital assets market in the heart of the Caribbean.
The plan was epitomised by FTX’s blowout conference in April, featuring appearances from Bahamas 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 muffling fog of silence has descended on the island, as I have discovered during my stay here this week.
For the prime minister, FTX’s collapse is a serious challenge because he viewed 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 himself to himself. “He’s just a young kid that’s hiding in Albany,” one cab driver told me.
Albany is a luxury resort community, jointly owned by Tiger Woods, Ernie Els, Justin Timberlake and Joe Lewis, the British entrepreneur.
One local told me Albany is an “island within an island”, a place where members can live out their entire lives, almost never having to leave. There is even a high school for kids. A 600-acre community, the mystery lies well 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 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.”
That’s secret in a non-ostentatious sense rather than a nefarious one. Still, it works like a charm when a storm hits. Repeated efforts to get behind Albany’s doors have come to nothing. Non-member passes were once on sale but one Albany employee told me none are available now. A car driver leaving the estate wouldn’t give comments to the press; in his haste to leave he nearly drove over my foot. Another employee told me curtly that: “Albany functions on confidentiality.”
Stefen Deleveaux, chief executive of the Caribbean Blockchain Alliance, said over lunch that people “just don’t really think about Albany”. “We’re not going to 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 is trying to avoid the spotlight. Over at Baha Mar, the luxury resort for that era-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 — who I found at the conference centre FTX used — told me “everyone was excited” when the crypto kings came to town.
The jazz club, I’m told, was a favourite among the FTX crew. But when push came to shove, Baha Mar also pulled the drawbridge.
“Nobody is going to tell you anything about anything,” one front-desk staff member told me. I pushed 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 neck out on “delicate” issues like this one. Not even the government: I have asked repeatedly for an interview with the prime minister but my requests have been turned down. “People don’t want to expose themselves to unwanted public scrutiny,” one Bahamian told me.
While some scurry to avoid awkward questions, in the palm trees and clear water beaches that surround the island it is ordinary people that lose out. A cab driver told me Bahamians are disappointed about 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 symbolised than by the desolate and overgrown site that was meant to house the exchange’s future marquee office on the island.
Yet despite the wall of silence, I’d be remiss not to mention the scene at Nassau’s airport, which was still inexplicably running ads for FTX when I arrived. As one dismayed couple at passport control noted: “The first thing they tell you to do 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 FT’s Crypto and Digital Assets Summit: Winter Edition on November 28 where FT colleagues and I discuss where regulation is heading. It includes appearances from CFTC chair Rostin Behnam and Esma chair Verena Ross. As a FT premium subscriber you can use promo code PREMIUM2022 to watch digitally for free, or use FT25 to get 25% off your in-person pass.
What we spotted
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Every capital has a café or restaurant frequented by the country’s most powerful people. In Nassau, that’s Café Matisse, and it proved to be worth a visit during my stay. One MP told me The Bahamas is not letting Bankman-Fried go anywhere “until the US decides what they want to do”.
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My colleague Madison Darbyshire suggested I dig 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 typically ordered about $500 worth of food a pop. Maybe Albany’s restaurants weren’t up to FTX’s standards.
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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.
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New FTX chief John Ray III laid 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 trustworthy financial information”. And this is the man who oversaw the liquidation of Enron!
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And finally, my colleague Hannah Murphy recently had lunch with the introverted chief of Coinbase Brian Armstrong in San Francisco. Here’s the account of 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, alas, 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 whether other authorities reach 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 crash in the summer.
Data from CryptoCompare indicate just how much of the industry’s flagship cryptocurrency has flowed out of some of the largest exchanges so far this month. From what we hear, some business is trading off-exchange and some investors are selling down holdings. Others are simply HODLing for better times.
