After FTX Implosion, Bahamian Tech Entrepreneurs Try to Pick Up the Pieces
Crypto Isle, a crypto co-working space in Nassau, Bahamas in Dec. 2022. Credit - Victor J. Blue/Bloomberg--Getty Images
When FTX moved from Hong Kong to the Bahamas in the fall of 2021, many Bahamians hoped that the crypto exchange’s presence would transform the island. “The Bahamas begins its rise as the next global FinTech hub,” Prime Minister Philip Davis said at the company’s opening ceremony on the island as he stood next to former FTX CEO Sam Bankman-Fried. “The arrival of FTX is proof positive that we are headed in the right direction.”
A year and a half later, FTX is gone following a stunning implosion, casting a long shadow over the country’s tech dreams. Some Bahamian entrepreneurs and tech leaders argue there’s still plenty of cause for optimism, due to the country’s regulatory incentives for businesses and growing tech infrastructure. But others say that the FTX saga has made it harder to convince an already-wary public to embrace new forms of financial and technological innovation, including the country’s digital dollar.
“The Bahamas is always 5 to 10 years behind in technology,” says Travis Miller, a Bahamian technology and business consultant. “I think it sets us back from a technology perspective because I think a lot of people will be more skeptical.”
‘FTX Will Always Be Here’
The Bahamas economy has long been reliant on tourism and offshore banking. Tourism and related services make up about 70% of the country’s GDP, according to the International Trade Administration. But Hurricane Dorian and COVID-19 both led to steep declines in visitors and exposed the fragility of this model.
During the coronavirus pandemic, the Bahamian government worked to make the country more appealing to fintech companies. In October 2020, the Bahamas became the first country to issue a digital dollar, called the SAND Dollar. The SAND Dollar is designed to always hold the value of a U.S. dollar. (The country’s traditional currency, the Bahamian dollar, is also pegged to the dollar.) The SAND Dollar is fully backed by the government and can be sent and received over a mobile phone for free in transactions similar for users to using Paypal or Venmo, but without a third party intermediary taking a processing fee.
In December 2020, the government passed the DARE (Digital Assets and Registered Exchanges) Act, becoming one of the only countries in the world to set a licensing framework for crypto exchanges to legally set up shop. FTX was the first company to take advantage of the new measure, moving from Hong Kong to the Bahamas in 2021.
Caroline Ellison, the CEO of FTX’s sister company Alameda Research, wrote on an Effective Altruism forum in October 2021 that the company’s move to the Bahamas was “due primarily to the friendly regulatory environment” and a government that was “cutting back on red tape.” Adding to the appeal was the fact that Bahamian companies do not have to pay taxes on income, capital gains, or wealth.
While FTX stood to gain significantly from the move, executives also promised that their presence would positively impact the Bahamas itself. “FTX belongs in the Bahamas. FTX will always be here,” declared Valdez K. Russell, a Bahamian and the company’s new vice president of communications and corporate social responsibility, in a radio interview with Nahaja Black in January 2022. “We will be a vital part of our economic growth and touch the lives of every Bahamian, one way or another.”
Many Bahamians, especially those already involved in tech and crypto, were excited by FTX’s arrival. “Everyone was like, ‘Okay, we have a big dog here now!’” Michael Armogan, the president of the Bahamas Esports Federation, told TIME. “A lot of people were expecting and wanting the Bahamas to become a tech hub.”
Around the same time that FTX arrived, a co-working hub called Crypto Isle also opened its doors in Nassau, hoping to foster crypto education and entrepreneurship among Bahamians. Co-founder Davinia Bain says that while Crypto Isle’s efforts were completely independent from FTX, the exchange’s presence did increase local interest in cryptocurrencies.
“Life didn’t start and end with FTX. But when they did show up, it gave a huge floodlight on crypto and blockchain in the Bahamas, and that floodlight benefited everybody in the space,” she says. ‘Some of the larger firms, like accounting firms, law firms, and individual service providers, were like, ‘I need to get up to speed quickly: I want to be able to offer my services to new players in the space.’”
FTX and Bankman-Fried immediately started throwing their money around in donations to local causes. There was a $500,000 donation to Lend A Hand Bahamas and $1.1 million given to a newly formed Agricultural Development Committee, with money set aside for education and tools for farmers. In January 2022, the company donated $1.5 million worth of KN95 protective masks and coronavirus testing kits to the Bahamian government. Many other local organizations received donations.
“FTX became the gold mine, the new thing everyone wanted to get a slice of,” Miller says. “So much money was flowing from them. But little to no one was paying attention in terms of exactly how this money was actually being generated.”
Read More: Where Did FTX’s Missing $8 Billion Go? Crypto Investigators Offer New Clues
But Bahamian entrepreneurs didn’t just want to see charity: they wanted to see lasting change, and to become integrated into this new tech ecosystem that FTX was building. Tyler Gordon, who was part of the crypto-focused organization Bahamas Masterminds, says that when FTX held an early meet-and-greet on the island, he pressed the company on its commitment to the island’s people. “That was a large concern that we had: this huge company was going to come in and get exceptions, cutting edge infrastructure, and all that sort of stuff that Bahamians need on a daily basis, but are told that we can’t get,” he said. Gordon and other crypto enthusiasts wanted to more easily be able to deposit and withdraw crypto via Bahamian banks, for example, something that was restricted by the country’s financial institutions.
FTX pledged that it would hire Bahamians and help the larger population develop technical skills. In January 2022, Russell said that the company had already hired 40 Bahamians, working on compliance teams, security, and legal services.
In April 2022, FTX hosted the Crypto Bahamas conference. It featured high-profile speakers like the former U.S. president Bill Clinton and a slew of celebrities including Katy Perry and Orlando Bloom. Because the conference was invite-only, with tickets costing $3,000 and up, it was mostly inaccessible to locals. But some found their way in, including Lamont Astwood, another Bahamas Masterminds member who signed up for a free pass via the blockchain Solana’s hacker house. Astwood spent the weekend meeting entrepreneurs and learning about crypto, and even snapped a selfie with Bankman-Fried. “It was extravagant,” he says. “You’d wake up, watch seminars all day, network, then choose between pool parties, nightclubs, beach parties. It was just nonstop.”
A little more than seven months later, the party was over for Bankman-Fried: He was arrested by the Royal Bahamas Police Force and extradited to the U.S. on charges including fraud and money laundering. The lavish $60 million campus that Bankman-Fried had broken ground upon alongside Prime Minister Davis would lie dormant, and dozens of Bahamians employed by FTX suddenly found themselves out of a job.
Miller says that FTX’s implosion ultimately wasn’t surprising to him, because “they were spending money so fast, it was almost too good to be true.”
Some entrepreneurs also say that the FTX crash may be having a negative impact on the rollout of the Sand Dollar, the Bahamas’ digital currency. “Reputationally, it has affected us,” says Nicholas Rees, the CEO Kanoo Pays, a digital payments system that is working to increase Sand Dollar adoption around the island. “The fear of technology is something that we’ve had to address significantly in the Bahamas and in the Caribbean [more broadly]. And when FTX collapsed, it made investors and customers look at technology companies as a whole, particularly in the financial services space, with a certain level of caution.”
In the weeks before FTX’s crash, its venture capital arm was about to announce an investment in the Kanoo Innovation Hub, a new incubator for tech and crypto entrepreneurs backed by Rees’s and Bain’s organizations. Rees says that FTX was planning to assist in the funding of the entrepreneurs in the organization’s first cohort. That offer evaporated along with the company. “The fact that they would be interested was an honor to us—and the house just crumbled at that time,” Rees says.
However, Bain says that the Innovation Hub was “never financially modeled based on a potential relationship with FTX,” and that the program is still carrying on as planned, with more than 30 entrepreneurs still participating in their inaugural program. Bain hopes that the program will spur Bahamians themselves to create their own robust crypto infrastructure. “We need to ensure there are more Bahamian players so we don’t have this ‘key man’ risk, where you have one or two major players and if something goes wrong, everybody’s thinking the industry is gonna go to hell,” she says.
While rising Bahamian entrepreneurs are still hard at work, Gordon says the prospect of adoption has slowed dramatically. He says that when he’s had recent conversations with politicians and bankers about crypto, they’ve responded with widespread skepticism. “It’s kind of iffy as to whether it would be feasible for us to integrate crypto into anything else,” he says,” and what that would realistically look like now that people have had the wool removed from their eyes.”