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Crypto Firm FTX Landed in the Bahamas With a Bang, and Now the Bahamas Is Picking Up the Pieces

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NASSAU, Bahamas—Last year, an FTX executive walked into a bank office here and put $4.5 million of the company’s money behind an ambitious plan to buy an oceanside parcel of land and turn it into the crypto giant’s new headquarters.

The executive,

Ryan Salame,

closed the deal in short order, people familiar with the matter said, just part of the company’s whirlwind real-estate shopping spree in and around Nassau. In April, the Bahamas prime minister appeared with FTX executives at a ceremonial groundbreaking on the new land. But construction never really got under way. FTX collapsed this month, its real-estate holdings now subsumed in bankruptcy.

The never-built new headquarters illustrates the promise that FTX brought to the Bahamas and the frustration it left in its wake. The island nation has been encouraging crypto firms to make themselves at home, promising a copacetic regulatory touch—exactly what founder

Sam Bankman-Fried

was looking for when he decided to move FTX headquarters from Hong Kong last year.

FTX wasn’t the only crypto player in town but it was the flashiest, leasing fleets of cars for its employees to drive, The Wall Street Journal reported. It snapped up units in a luxe resort called Albany—a private neighborhood that has counted Tiger Woods and Justin Timberlake as investors. Now, local caterers, drivers and cleaners who depended on FTX for work are in a bind.

So is the prime minister,

Philip Davis.

Across the archipelago, locals are second-guessing his government’s commitment to crypto.

“The Bahamas is getting a black eye at every turn on this,” one of the Bahamas’ largest newspapers, the Nassau Guardian, wrote in an editorial this week that criticized Mr. Davis’s embrace of FTX.

Philip Davis, prime minister of the Bahamas, has made digital assets a centerpiece of his agenda.



Photo:

Bloomberg News

In a speech to parliament last week, Mr. Davis described FTX’s collapse as merely one example of broader problems in the tech industry and not an indictment of regulatory oversight in the Bahamas. He said the Bahamian government would investigate FTX thoroughly.

Mr. Salame has told people close to him that he threw up when he became aware of FTX’s problems this month, the Journal previously reported.

Most everything in the Bahamas centers on the island of New Providence, including FTX. The 80-square-mile island is home to the Bahamas’ capital, Nassau, and about 275,000 residents, the bulk of the country’s citizens.

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The country’s economic anchors are tourism and offshore banking, which together make up 85% of gross domestic product, according to the U.S. Commerce Department.

Mr. Davis, elected in September 2021, has made digital assets a centerpiece of his agenda. The island country had been hit hard by Hurricane Dorian in 2019 and the coronavirus in 2020, both of which kept tourists away. Mr. Davis’s government promised that crypto would be a critical piece of the recovery. “My government’s initial success in attracting significant digital-asset business is only the beginning,” Mr. Davis told the Bahamas’ House of Assembly in April.

Most everything in the Bahamas centers on the island of New Providence, including FTX.



Photo:

Levi Mandel for The Wall Street Journal

For many locals, FTX’s arrival in New Providence last year felt like a path forward. The company’s spending seemed unbounded.

At its offices in a nondescript office park, FTX spent more than $100,000 a week on catering and set up a private shuttle service to cart workers around the island, according to people familiar with the matter.

One chef who delivered meals to FTX offices recalled tables already stacked with containers of food. One former employee described an hourly rotation of food deliveries during lunchtime. Chinese food was a regular fixture, according to people familiar with the matter, given that many FTX employees had moved from Hong Kong. FTX provided fleets of cars—including BMWs, Toyotas and Hondas—for employee use.

FTX also hired dozens of Bahamians, the Journal reported. The jobs were often for logistics, such as helping organize events, and regulatory compliance.

Earlier this year, FTX employees were given the opportunity to buy equity in the cryptocurrency exchange. Excited to be part of what seemed like a promising new industry, some local hires spent thousands of dollars to buy FTX equity, the Journal reported.

In June, the company laid off about 20 employees, mostly in the Bahamas, the Journal reported.

More than a year before its collapse, FTX moved its headquarters to the Bahamas—a country that worked to lure crypto companies to its shores. So what makes the nation attractive to crypto? And how could FTX’s demise change that? Illustration: Adele Morgan

The sites where Mr. Bankman-Fried and his closest associates lived and worked were part of a finance-centric enclave on the western half of New Providence. There, Nassau’s tourist resorts, restaurants and Black residential neighborhoods give way to the offices of foreign banks and wealth managers, a

Berkshire Hathaway

real-estate office and Deltec Bank & Trust Ltd., a bank where Tether—a popular stablecoin—does business.

Starting late last year, FTX started calling Bahamian banks with an unusual offer, the Journal reported: Deposit your cash in FTX’s crypto-lending platform in exchange for interest of as much as 12%, according to bankers.

“Effectively, they were looking for funding,” said a partner at one of the banks, which turned down the offer.

The company spent millions of dollars on housing for executives in exclusive beachside developments, the Journal reported.

FTX bought a handful of units in the Albany resort, a gated neighborhood of homes and sleek condominium towers arranged around a marina on New Providence’s south shore. There, Mr. Bankman-Fried shared a $30 million penthouse with some of his top FTX lieutenants.

The resort kept a restaurant open 24 hours a day with FTX employees in mind, the Journal reported.

Some Bahamians are now questioning the role of the crypto sector in their country’s economy, stung by thoughts of how FTX’s rapid collapse has shaped their country’s reputation.

FTX bought a handful of units in the Albany resort on New Providence’s south shore.



Photo:

Levi Mandel for The Wall Street Journal

“In the eyes of many people, we’re a joke,”

Pamela Musgrove,

a Bahamas-based financial-services executive, said on a Nassau radio show this month.

Many of the big-spending young foreigners FTX employed—Americans, Asians and Europeans—departed quickly after the company’s collapse, the Journal reported. Bahamian security guards found themselves protecting nearly vacant buildings.

Mr. Bankman-Fried apologized in a recent note to employees.

“You were my family,” he wrote. “I’ve lost that, and our old home is an empty warehouse of monitors.”

Alexander Osipovich, Dave Michaels and Caitlin Ostroff contributed to this article.

Write to Matt Grossman at [email protected] and Angel Au-Yeung at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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