The Bahamas. Apart from its tranquil white beaches, the archipelago is probably known as a tax haven amongst the wealthy, as there is no personal income tax. The island country’s favorable tax and regulatory frameworks have been a big draw for crypto companies. Fallen crypto exchange FTX is headquartered in the Bahamas and according to reports by Reuters, Sam Bankman-Fried and his executives collectively bought properties worth $300 million in the tiny state.
On November 22, attorneys for crypto exchange FTX revealed that the company was run as a “personal fiefdom” of Bankman-Fried, and the founder’s parents and senior staff invested heavily in pricey real-estate projects.
Crypto exchange FTX’s Bahamas Vacation
Documents accessed by Reuters showed that most of the purchases were luxury beachfront homes. Bankman-Fried reportedly “broke ground” on FTX’s future headquarters with a $60 million plot but never began construction. He also shelled out thousands to feed his Bahamas-based staff, before the crypto exchange FTX collapsed. The billionaire founder also purchased a 52-foot HCB yacht.
Local media also reported that FTX donated millions to Bahamas’ charities and local government, stretching its influence far beyond the island nation.
FTX CEO John Ray, however, acknowledged that the crypto exchange and its sister companies did not have a handle on functional accounting and human resource departments. He made the revelations in a court filing after FTX filed for bankruptcy. Ray revealed that Sam Bankman-Fried also received a $1 billion personal loan from one of his companies.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” wrote Ray, after noting twice he had worked on Enron’s collapse, in a court filing this week. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” In early November, Binance backed out buying FTX citing financial discrepancies.
A filing on November 19 revealed that the crypto exchange owed 50 creditors approximately $3.1 billion. Over a million customers and other investors are faced with losses to the tune of millions, and have no idea when they will get their money.
Authorities in The Bahamas Take Charge
As news about crypto exchange FTX’s misfortunes spread, the authorities in the Bahamas stepped in to prevent things from going worse. The Securities Commission of The Bahamas revealed that it had ordered the crypto exchange to transfer all of its digital assets to a digital wallet controlled by the agency.
“Urgent interim regulatory action was necessary to protect the interests of clients and creditors” of FTX Digital Markets, said the agency. The regulatory agency made the decision after Ray’s court filings revealed the extent of financial irregularities and mismanagement at the crypto firm that led to FTX’s collapse.
Just a day before FTX’s collapse became official, Sam Bankman-Fried misled everyone by tweeting “FTX US users are fine.” It is clear his actions have not gone down well with the Bahamian community. Those who worked at FTX were unaware that the company was recklessly directing billions of customer deposits to its trading concern Alameda Research, to use for risky investments.
Earlier, the Royal Bahamas Police Force also revealed that they are investigating the crypto firm for potential misconduct involving FTX’s collapse. Meanwhile, the securities agency will consult other regulators and work with authorities on how best to safeguard the interests of creditors, clients and stakeholders of FTX.
Perhaps, what has irked former employees and stakeholders more than the collapse is Bankman-Fried’s refusal to take the situation seriously. His ambiguous tweets have done nothing to assuage worries and as one former employee told Forbes. “You’re writing this cryptic bullshit and the only thing you have to say is ‘sorry.’”
