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FTX’s Bahamas crypto empire: Stimulants, subterfuge and a spectacular collapse


Crypto wunderkind Sam Bankman-Fried had promised the island paradise a path to financial glory. His meltdown has left some Bahamians worried about the ripple effects.

(Video: Courtey of Margaux Avedisian; Jeenah Moon/Bloomberg; Obtained by The Post)

Comment

NASSAU, Bahamas — Before Sam Bankman-Fried’s $16 billion empire imploded, Margaux Avedisian remembers thinking there was something unsettling about the cryptocurrency wunderkind.

Bankman-Fried had become a legend by pushing an image of monkish aloofness, vowing to forsake the allures of his extraordinary wealth — sleeping on beanbag chairs, driving a Toyota Corolla — and to give away his fortune for the greater good.

Yet in April, when Avedisian was hired as a master of ceremonies for a conference in the Bahamas sponsored by FTX, Bankman-Fried’s crypto exchange, she saw how the 30-year-old billionaire really lived: in a guarded island compound, every need closely catered to, the world’s elite at his beck and call.

Conference guests partied in casinos where Bahamians weren’t allowed to gamble and hobnobbed with celebrity attendees, including singer Katy Perry and football veteran Tom Brady. For one party, VIPs took a boat from the island to a second, even fancier island for a feast of lobster, a private DJ concert and an open bar.

“You’re living this lifestyle of poverty, but you’re partying with Katy Perry?” she recalled thinking. “Why would you want to hang out with these celebrities if you’re so head-down trying to change the world?”

When Bankman-Fried and his band of crypto risk-takers moved to the Bahamas last year in a blitz of extravagant spending, they promised to remake the island paradise into a global capital of the new financial elite. Some Bahamians said they felt lucky to have an opportunity to work so close to a superstar.

Instead, Bankman-Fried stepped down as FTX’s CEO earlier this month after presiding over one of the fastest meltdowns of wealth in modern history. FTX, valued earlier this year at $32 billion, has been declared bankrupt, and his $16 billion personal fortune nosedived to zero in less than a week.

James Bromley, an FTX lawyer, said at a bankruptcy hearing Tuesday that Bankman-Fried had treated the company as his “personal fiefdom” before it all fell apart. “The emperor had no clothes,” he said.

The do-gooder movement that shielded Sam Bankman-Fried from scrutiny

In the Bahamas, many are anxiously waiting to see how the fallout from this legendary blunder will shape their lives. At a gate that workers use to enter Albany, the closely guarded enclave where Bankman-Fried and his top deputies shared a $40 million waterfront penthouse, one construction worker told a reporter on a recent morning that, if Bankman-Fried were still inside, “we would grab him and bring him out.”

A giant lawn at the center of the Albany, a gated luxury enclave in the Bahamas, featured a full-size replica statue of Wall Street’s Charging Bull. (Video: Obtained by The Post)

As investigators begin to piece together FTX’s financial wreckage, the Bahamas has emerged as a centerpiece for Bankman-Fried’s many contradictions — and fueled questions about why so many there and elsewhere had supported a company with so many warning signs.

FTX had called itself “the cleanest brand in crypto” and promised investors “High Returns, No Risk.” But FTX’s new chief, John J. Ray III, hired to clean up the mess, said in a recent legal filing that Bankman-Fried’s “very small group of inexperienced, unsophisticated and potentially compromised individuals” in the Bahamas had spent lavishly on themselves while failing to track where billions of clients’ dollars were sent or stored.

Though FTX became one of the world’s biggest financial exchanges, rooted in a complex web of more than 130 now-bankrupt business entities, the team functioned like a dorm-room start-up, with no centralized lists of bank accounts or even employees, Ray said.

FTX spent clients’ funds on seaside homes for employees’ use and routed money to Bankman-Fried’s other company, the crypto trading firm Alameda Research, Ray said. Corporate reimbursements were often requested via an online chat box and approved by supervisors using “personalized emoji.” Only “a fraction” of customers’ money has been located and secured.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information,” said Ray, who once oversaw the liquidation of Enron, one of America’s most infamous corporate frauds.

In a letter to FTX employees on Tuesday, Bankman-Fried said he regretted “what happened to all of you” and tried to deflect blame onto external factors, such as a rush of withdrawals and a market crash, without acknowledging the reported misuse of customer funds. “You were my family. I’ve lost that, and our old home is an empty warehouse of monitors,” he wrote. “When I turn around, there’s no one left to talk to.”

The victims of FTX’s spectacular collapse are just now being counted, and the damage will probably be enormous: In bankruptcy court filings, lawyers have estimated that more than a million people or businesses have lost money, with more than $3 billion in losses from the top 50 creditors alone.

But in the Bahamas, the implosion has meant not just lost fortunes but lost confidence in a dream of financial acclaim.

“There was just this feeling of overall shock,” said Tevin Bannister, a community manager at Crypto Isle, a co-working space for blockchain investors and entrepreneurs in Nassau. How many of the people who worked hard when FTX landed here, he wondered, have been burned?

Sam Bankman-Fried charmed Washington. Then his crypto empire imploded.

In October 2021, Bankman-Fried and his crew landed in the Bahamas with the force of a conquering power.

FTX had just been valued at $25 billion after raising $420 million from major investors, including the Ontario teachers’ pension plan, in a move that Bankman-Fried had said cemented FTX as “the world’s most transparent” crypto exchange.

Bitcoin had just reached a record high at $66,000, and FTX had become one of the crypto industry’s biggest names thanks to a gusher of promotional spending: The Miami Heat basketball team played in the FTX Arena, and Major League Baseball umpires wore the crypto exchange’s logo on their arms.

Bankman-Fried that month had just left Hong Kong for the Bahamas, citing the tropical archipelago’s permissive regulations around both crypto trading and pandemic-era travel — important, given Bankman-Fried’s frequent international investor meetings and media tours.

The Bahamas, a former British colony comprising hundreds of islands 45 minutes from the Florida coast, has for decades been a darling of American tourists for its scenic beaches — and of offshore financial engineers and money launderers for its minimal taxes and corporate disclosure rules.

Bankman-Fried’s FTX spent hundreds of millions of dollars buying up top-grade real estate across the Bahamas’ most populous island, New Providence, including offices, apartments and vacation homes used by FTX’s senior executives, according to property records and FTX attorneys.

A major chunk of the spending spree went to Albany, an ultraexclusive luxury community developed in 2010 by a British billionaire with investment from musician Justin Timberlake and golfers Tiger Woods and Ernie Els.

Encircled by marshes and scrub forests, the 600-acre community of pearl-white towers is walled-off to practically everyone. A giant lawn at the community’s center, near a Rolex store, features a full-size replica of Wall Street’s famous Charging Bull sculpture. A lavish recording studio there, known as the Sanctuary, has been used by Drake, Mariah Carey and Alicia Keys.

Bankman-Fried and nine of his closest allies moved into one of the community’s crown jewels, a sprawling penthouse atop a luxury tower known as the Orchid. Their balcony overlooked an oceanfront marina where action-movie-caliber speedboats are anchored, and where, on a recent visit, crews could be seen cleaning the decks of 200-foot megayachts with names such as Dare to Dream.

The view from Bankman-Fried’s $40 million penthouse in the Albany, a gated luxury enclave in the Bahamas. (Video: Obtained by The Post)

After Bankman-Fried moved in, the enclave’s workers began sharing rumors and sightings about the movement of this strangely disheveled billionaire, according to contractors who spoke with a reporter outside the gates.

One construction worker, who spoke on the condition of anonymity because he’d not been authorized to talk, said Bankman-Fried was frequently spotted walking the grounds of Albany “like a regular tourist.”

“There was no one who would bother him,” the man said. “It’s like a different world there.”

FTX says it owes more than $3 billion to creditors

In fawning profiles, Bankman-Fried, known as “SBF,” had long been celebrated for his “seeming rejection of earthly pleasures”: He parked a Toyota Corolla in the penthouse parking lot and shared photographs of himself sleeping on office beanbag chairs — a sign of his hardcore dedication. “Putting the finishing touches on the Nassau office,” Bankman-Fried tweeted that October, attaching a photo of a rumpled beanbag.

He almost exclusively wore shlubby T-shirts, shorts and tube socks and never combed his nest of curly hair. He played video games during conference calls with major investors, and he was candid about his use of performance-enhancing drugs, tweeting in 2019 his keys to success: “stimulants when you wake up, sleeping pills … when you sleep,” and in-office naps to keep one’s mind in “work mode.”

Photos of his office setup — a gaming chair sitting at a cluttered desk, entombed in half a dozen computer screens — sometimes showed boxes for Emsam, a stimulant patch used recreationally to boost focus and confidence. The chemical playbook was common among his work buddies: Caroline Ellison, a co-chief of Bankman-Fried’s Alameda Research, tweeted last year, “Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, nonmedicated human experience is.”

The odd behavior did not stop Bankman-Fried from building a brand as the volatile industry’s voice of reason. He’d been celebrated for pushing for crypto regulation on Capitol Hill, donating generously to pandemic-prevention efforts and Democratic politicians, and preaching a dogma known as “effective altruism” that used math and logic to determine where their donations could accomplish the most global good.

But the Bahamas outpost showed how inaccurate Bankman-Fried’s ascetic image had become. FTX offered its workers incredible luxury, giving its employees free meals and a personal chauffeur service…



Read More: FTX’s Bahamas crypto empire: Stimulants, subterfuge and a spectacular collapse

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