- [Narrator] This was the scene six months ago
in The Bahamas.
That person in shorts is, of course,
FTX founder Sam Bankman-Fried,
otherwise as known as SBF.
He's seen here with Bahamian Prime Minister Philip Davis,
breaking ground at the site set
for FTXs' global headquarters.
- The arrival and presence of FTX
underscores the readiness of The Bahamas
to be a home for global leaders in the crypto space.
- [Narrator] But now that land sits empty.
The celebrated project abandoned.
So what made The Bahamas so appealing to FTX
in the first place?
And what will happen to the nation's crypto hub status
now that its biggest player has collapsed?
- The relationship between FTX and The Bahamas,
it's been interesting to watch.
- [Narrator] WSJ's Angel Au-Yeung went to Nassau
to cover the fall of FTX.
- Obviously, the Bahamian government wanted companies
like FTX to come to The Bahamas.
- [Narrator] And so it went about courting these companies.
It was the first to issue its national currency
in digital form.
- [Announcer] Sand Dollar, the digital Bahamian dollar.
- [Narrator] It hosted a crypto conference,
presented by FTX.
- Welcome to The Bahamas.
- [Narrator] But most importantly,
it enacted a comprehensive legal framework
for digital assets, like cryptocurrency.
- The Bahamas is a couple steps ahead than the US
of trying to create a regulatory environment
for the industry.
And that really boils down to the DARE Act
that was passed in the end of 2020.
- [Narrator] The Digital Assets and Registered Exchanges Act
or DARE is intended to give firms like FTX clear rules
to adhere to.
- Before a company,
especially that's gonna be a digital exchange,
puts its headquarters in a country,
it wants to have certainty about how that country
is classifying all these different products.
- [Narrator] That's attorney Bruce Zagaris
who's worked on Caribbean financial services matters
and international white collar crime.
The DARE framework he's talking about
doesn't yet exist in the US
but regulation is something SBF has called for.
- The fact that FTX wanted to make their headquarters
in The Bahamas, it gave legitimacy
to the DARE Act and the DARE Act gave legitimacy to FTX.
- [Narrator] However, having regulations
and enforcing them are two different things.
The Financial Action Task Force,
a global financial watchdog,
has previously put The Bahamas on its so-called gray list
for increased monitoring.
The country was only delisted two years ago.
- The Bahamas' regulatory regime is not as harsh
and so most likely, FTX was hoping
or maybe even expecting that The Bahamas
would not partially implement its DARE Act.
- [Narrator] Both FTX and the Securities Commission
of The Bahamas did not respond to requests for comment.
(pensive music)
There's also how the country deals with taxes.
Last month, the European Union added The Bahamas
to its tax haven blacklist,
which identifies jurisdictions
that don't yet comply with all international tax standards.
The country doesn't charge personal,
capital gains, estate, gift or inheritance taxes.
It also doesn't have corporate tax
unless that revenue is derived from within The Bahamas.
- The US is known for having high personal income taxes,
no matter where you live.
I mean, you can move to some states
and you might have a lower income tax rate
but nothing beats The Bahamas.
So I can see why The Bahamas
is a particularly attractive option to somebody like SBF
how has publicly stated that the wants to make
as much personal money as possible
to give back to various causes.
- [Narrator] Another thing The Bahamas has going for it,
it's really close to the US,
just about an hour flight to Miami.
- It's very helpful if you're a company like FTX
and you want to attract US business
and you wanna do business in the US,
but yet you don't wanna be subject to all the regulation
and the tax regime.
- [Narrator] Fly about two hours further north,
and there's D.C.
SBF has become something of a regular on Capitol Hill
over the last year,
even testifying before the Senate on crypto regulation.
- The industry has the potential
to improve a lot of people's lives.
- [Narrator] But now with FTX's collapse,
the decision to headquarter in The Bahamas
is complicating its bankruptcy.
FTX's new leadership is at odds
with the country's regulators
who over who has control
over billions in customer assets.
- Is it gonna be the Bahamian authorities
who have control of these assets
for the liquidation process?
Or will the SEC be involved?
There are still really big questions
on who's going to be responsible
for a holding FTX accountable.
- [Narrator] It's unclear yet how severely FTX's collapse
will affect The Bahamas
but experts expect that it will harm the country,
and its reputation as a crypto hub.
- The fact that they've attracted
the number three digital exchange,
that it quickly went from success to bankruptcy
has jeopardized the new product
and the new innovation that The Bahamas
has undertaken unfortunately.
- [Narrator] FTX's collapse will likely force The Bahamas
and other governments to look more closely
at the crypto industry.
- For years now, every government has known
that this is an issue that is not going to go away.
But with this collapse, now that billions upon billions
of customers' money has been lost,
it's going to force these governments
to enact an accountability framework much faster
than they might have been willing to do previously.
- [Narrator] As for SBF, it remains to be seen
what action, if any, The Bahamas might take against him.
(pensive music)