In the Bahamas, a Lingering Sympathy for Sam Bankman-Fried
There’s a popular reggaeton phrase, “money can’t done,” meaning that fabulous wealth makes its own rules. In the Bahamas in recent months, it has become a gleeful reference to the once high-flying resident Sam Bankman-Fried.
From Washington to Wall Street, Mr. Bankman-Fried is now persona non grata. Politicians, investors and cryptocurrency types all but compete to declare most vigorously how little they think of Mr. Bankman-Fried, the fallen founder of the cryptocurrency exchange FTX.
Not so in the Bahamas, where Mr. Bankman-Fried lived for the past year in a lavish gated community on the western shore of New Providence Island, near the nation’s capital, Nassau. Few here predicted that he would spend his final week on the island farther inland to the east, in a neighborhood home to high crime and shacks, inside perhaps the Caribbean’s most notorious prison.
“I think he had a good heart,” said Shemeca Moss, a Nassau school administrator. Ms. Moss was shopping on a recent afternoon at a beauty supply shop a few blocks from Fox Hill prison, where Mr. Bankman-Fried was held for a week before he was extradited to the United States on Wednesday to face sweeping fraud charges.
“He’s Bahamian,” she added, as part of the explanation for her sympathies.
The connection between Bahamians and Mr. Bankman-Fried, who was born and spent most of his life in California, reflects a complicated set of circumstances. Much as he did in the United States, Mr. Bankman-Fried donated millions of dollars to a dizzying collection of Bahamian charities, churches and government entities — including the local police. In March, FTX covered the cost of a ritzy resort ballroom used for a state reception to welcome Prince William and Catherine Middleton, then the Duke and Duchess of Cambridge, who were visiting the island.
What to Know About the Collapse of FTX
What is FTX? FTX is a now bankrupt company that was one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. The company, based in the Bahamas, built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30-year-old founder of FTX and the former chief executive of FTX. Once a golden boy of the crypto industry, he was a major donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that urges adherents to give away their wealth in efficient and logical ways.
How did FTX’s troubles begin? Last year, Changpeng Zhao, the chief executive of Binance, the world’s largest crypto exchange, sold the stake he held in FTX back to Mr. Bankman-Fried, receiving a number of FTT tokens in exchange. In November, Mr. Zhao said he would sell the tokens and expressed concerns about FTX’s financial stability. The move, which drove down the price of FTT, spooked investors.
What led to FTX’s collapse? Mr. Zhao’s announcement drove down the price and spooked investors. Traders rushed to withdraw from FTX, causing the company to have a $8 billion shortfall. Binance, FTX’s main rival, offered a loan to save the company but later pulled out, forcing FTX to file for bankruptcy on Nov. 11.
Why was Mr. Bankman-Fried arrested? FTX’s collapse kicked off investigations by the Justice Department and the Securities and Exchange Commission focused on whether FTX improperly used customer funds to prop up Alameda Research, a crypto trading platform that Mr. Bankman-Fried had helped start. On Dec. 12, Mr. Bankman-Fried was arrested in the Bahamas for lying to investors and committing fraud. The day after, the S.E.C. also filed civil fraud charges.
Once the golden boy of the crypto world, Mr. Bankman-Fried, 30, was arrested this month on criminal charges that included wire fraud, securities fraud, money laundering and violations of campaign finance laws. He is accused of diverting billions of dollars in customer funds to a trading platform he controlled. Two of his top former deputies pleaded guilty last week and are cooperating with federal prosecutors in building the case against him. One of them, Caroline Ellison, admitted to being involved in diverting the customer funds, telling a federal judge, “I knew that it was wrong.”
Yet in interviews across the island Mr. Bankman-Fried called home for just over a year, residents almost universally said that while the white-collar nature of his crimes was troublesome, they were hardly comparable to the gang violence that pervades some corners of the island. They expressed fears of economic fallout for the island if he and the other cryptocurrency brethren he attracted didn’t return.
Residents may find it easier to commiserate with Mr. Bankman-Fried because it is unlikely that FTX’s victims, who prosecutors say lost as much as $8 billion in the fraud, included many locals. Residents of the Bahamas must apply for special permission from the country’s central bank to invest in cryptocurrency, and the government levies a percentage fee for the privilege.
Perched on a concrete block in the shade outside the Nassau prison where the onetime wunderkind was held, Patrick Ferguson, a 61-year-old painter and longtime resident, said Mr. Bankman-Fried’s alleged crimes paled in comparison with those he generally associated with hard prison time. “It just doesn’t make any sense,” Mr. Ferguson said.
As the self-appointed standard-bearer for the crypto industry at large, Mr. Bankman-Fried was working to diversify the economy of an island that has long looked to expand beyond tourism, and that was punished by the decrease in visitors caused by the Covid-19 pandemic. He helped organize a spring crypto conference that brought in hundreds of well-heeled visitors. At Albany, the oceanfront compound where he and his associates lived, they were known as generous employers; one delivery driver said he was tipped more than $100 to take a modest Burger King order to a cryptocurrency investor there.
In some instances, residents’ attitudes reflect simple empathy. “I feel bad for him,” said Philip Butler, an elder at the Christian Life Church in Nassau.
FTX’s new chief executive, John J. Ray III, in congressional testimony this month accused the Bahamian authorities of illicitly withdrawing $100 million from the cryptocurrency exchange in the hours before it collapsed. Mr. Ray called the process “irregular,” and said the authorities had stonewalled his efforts to get answers. The securities regulator for the Bahamas denied that in a statement.
In the Bahamas, the overall crime rate is low, but those found guilty often receive long sentences. Fox Hill, where Mr. Bankman-Fried was held, is known locally as “Fox Hell.” It bursts with 1,400 prisoners — 40 percent more than it was built to house — and has limited running water, which often comes out brown, according to former prisoners and their families.
The Aftermath of FTX’s Downfall
The sudden collapse of the crypto exchange has left the industry stunned.
- A Spectacular Rise and Fall: Who is Sam Bankman-Fried and how did he become the face of crypto? “The Daily” charted the spectacular rise and fall of the man behind FTX.
- How FTX Operated: FTX called itself an exchange. But it was vastly different from stock exchanges, which are highly regulated and barred from engaging in many of the activities that the crypto company pursued.
- Political Donations: Federal prosecutors are seeking information from Democrats and Republicans about donations from Mr. Bankman-Fried and two former FTX executives.
- Ryan Salame: The former FTX executive, who told regulators about wrongdoing at the exchange and was a big Republican donor, has emerged as a central player in the scandal.
A former inmate released this year, Sean Hall, said a typical breakfast was grits with sardines, scooped into a moldy cup. For lunch, unseasoned ground meat with rice is common. Dinner is often not delivered at all. Violence was common, both at the hands of guards and fellow inmates.
By Fox Hill standards, Mr. Bankman-Fried received royal treatment. He was held in the prison’s medical wing with as many as five prisoners in a dormitory-style room that was under constant supervision, according to the administrator. A vegan, he was given toast and jam for breakfast; for lunches and dinners, he had stewed greens and other vegetables.
Still, the prison conditions weighed on Mr. Bankman-Fried’s decision to cut a deal with U.S. prosecutors to be extradited to the United States, according to a person briefed on the discussions.
The prison’s warden, Doan Cleare, said his former charge was “well cared for.” Mr. Cleare would not say why Mr. Bankman-Fried was held in the medical bay but did say he received no preferential treatment.
Twenty miles away on the western shore, construction crews continue to hum around Mr. Bankman-Fried’s sprawling former home. Scaffolding around new, yet-to-be-completed megamansions could be seen peeking over high, green walls that keep out onlookers. FTX had plans to construct a new boutique hotel, and a corporate headquarters that company executives compared to those of Apple or Google.
Over a Bahamian coffee (filtered brew, Nassau Royale liqueur and generous whipped cream), Jenny Pinder, a sales executive who moved to the Bahamas from St. Louis 15 years ago, said the hullabaloo around Mr. Bankman-Fried had sated her curiosity about his industry.
“I now have such a negative outlook on crypto,” she said. “I’m out.”
Royston Jones Jr. contributed reporting from Nassau, the Bahamas, and David Yaffe-Bellany from San Francisco.
