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The fall of FTX, and how its founder Sam Bankman-Fried was able to amass and then lose a US$32-billion empire, will turn closer scrutiny on the financial practices in The Bahamas and by extension the wider Caribbean.

The Caribbean is renown as a haven where money can be hidden and lax regulations and transparency prevail. It’s where, in many instances, the rich keep their money.

Bankman-Fried, aka SBF, chose to operate out of The Bahamas, carrying out cryptocurrency transactions under less prying eyes.

But when the bubble burst and with Uncle Sam wanting answers, it would be unwise for The Bahamas not to comply with an extradition request.

We all remember what happened in Jamaica when the Bruce Golding government was unwilling to hand over Christopher Coke, aka ‘Dudus’. There was not only blood in the streets, but it cost Golding the leadership of his party and he had to step down as prime minister.

Yesterday, The Bahamas Royal Police and attorney general were clear headed and arrested 30-year-old SBF.

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the SDNY,” Damian Williams, US Attorney for the Southern District of New York, said in a statement.

“We expect to move to unseal the indictment in the morning and will have more to say at that time.”

“The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.

Bahamas Prime Minister Philip Davis

Said Bahamas Prime Minister Philip Davis in a statement: “The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.

“While the United States is pursuing its own criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the FTX collapse, with continued cooperations of its law enforcement and regulatory partners in the United States and elsewhere.”

Very sensible and straight forward.

The Bahamas wants to conduct its own investigation into FTX and does not want that coloured by what the US is doing.

The new CEO of FTX, John J Ray III, has alluded to the lack of regulation in The Bahamas that allowed FTX to get into so much trouble.

Ray drew attention to “the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals,” at FTX.

Young people placed an overreliance on Slack and Quickbooks accounting software to run a multi-billion dollar cryptocurrency company.

They had little idea what they were doing and it has turned out to be a disaster with over a million customers losing money.

“I have never seen such an utter lack of record keeping. There were no corporate controls, no corporate oversight, no independent board: The owners, business and senior management had virtual control of all the accounts and could move money or assets as they desired, undetected by customers.

“To the extent there were rules, and there were very few, obviously they were made to be broken. At the end of the day, we are not going to be able to recover all the losses here. There was money spent that we will never get back,” said Ray.

BAHAMAS CLAIMS NEW FTX CEO HAS MADE ‘KEY MISSTATEMENTS’

The Bahamas has made it clear that it wants Ray to butt out of its enquiries and investigation. It said in no uncertain terms that Ray is grandstanding and is looking for attention and is not respectful of the country as an independent jurisdiction.

The Bahamas Securities Commission office put out a statement which read: “Key misstatements have been made by John J. Ray III. He does not appear to be concerned with facts but rather appears intent only to make headlines and advance questionable agendas. Filings were designed to create a false impression.

“The Securities Commission continues to conduct a comprehensive and diligent investigation into the causes of FTX’s failure. Unfortunately, it has been necessary for the Securities Commission to make a request to Mr Ray’s representatives to not obstruct that investigation. Mr Ray has not once reached out to the Securities Commission to discuss any of his concerns before airing them publicly.”

This is a dangerous road for The Bahamas to go down and already the Representative from New York, Alexandria Ocasio-Cortez, is proving to be a tenacious sniffer dog.

She has raised the question, why were 1,500 Bahamian customers allowed a 25-hour window to withdraw US$100 million from FTX before assets were frozen?

It transpires that SBF brokered a deal with the Bahamian authorities to unfreeze withdrawals just for Bahamian customers so “they can tomorrow withdraw all their assets”.

If that is the case, then Ray should be concerned and communications between SBF and Bahamian authorities should be closely inspected.

Today’s House of Representatives committee of inquiry into the FTX debacle slammed the cryptocurrency industry and it will come under closer scrutiny and be tightly regulated.

Juan Vargas, of California, believes cryptocurrency is only useful if you are a “terrorist or someone who wants to hide money”.

Vargas said: “I don’t get the point of blockchain and cryptocurrency. It’s like keeping track of how many times you chew gum -like who cares?”

Representative Rashida Tlaib added that crypto get-rich schemes are “predatory” and “bullshit”.

Said Tlaib: “That cryptocurrency can be a solution for financial inclusion is not only laughable, it’s dangerous.”

Brad Sherman, of the House of Representatives, scathingly said: ”Sam Bankman-Fried is a great long snake in the crypto Garden of Eden.

“The fact is, crypto is a garden of snakes.”

Bankman-Fried has been denied a request for US$250,000 bail in a Bahamas court.

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