While The Bahamas attempts to keep its reputation intact following the collapse of cryptocurrency exchange FTX, government officials can only watch as respected news media from the US disparage the country’s reputation as a financial jurisdiction and one that respects the rule of law.
The Washington Post published a scathing analysis of The Bahamas in the wake of the FTX debacle, with author Stephen Mihm pulling on the strings of the country’s past as a pirate retreat and its connection to blockade running to bring his story to life.
“In retrospect, Sam Bankman-Fried and his cryptocurrency gang gave investors ample reason to steer clear of FTX: misleading claims that investments were covered by the Federal Deposit Insurance Corp., too-cozy-for-comfort relations with government regulators and other problematic behavior,” Mihm wrote.
“But the biggest red flag may have been the first: the crypto exchange’s relocation to The Bahamas. For centuries, the island nation has been defined by its close ties to dodgy, even criminal finance.
“Far from being an anomaly, FTX was simply the latest in a long line of sketchy enterprises.
“The outlaw status of The Bahamas dates back to the 17th century, when the islands became the most important base for piracy in the Caribbean. While the British eventually drove the pirates away, the colony never lost its reputation for lawlessness.
“After the British Empire abolished slavery in 1838, the local planter elite launched a new enterprise, salvaging ships that ran aground. They lured ships to their doom through decoy lights and bribes paid to captains. Between 1858 and 1864 alone, 313 ships mysteriously ran aground in The Bahamas, their valuable cargos plundered.
“During this same period, The Bahamas hosted blockade runners selling guns to the Confederacy. After the Civil War, the islands became a natural staging area for smugglers eager to dodge US tariffs. Then, during Prohibition, the islands became a staging area for bootleggers shipping rum to the US.”
Mihm goes on to sully the work the financial sector in The Bahamas has done to improve the country’s reputation as a tax haven, and suggested that because of the country’s history, FTX, with all its follies now unearthed, was a natural fit for The Bahamas.
This kind of scrutiny is what Prime Minister Philip Davis hopes will not be the scar left on the country when the FTX matter is resolved.
Davis said during an address to the House of Assembly about FTX: “The Bahamas will emerge from the proceedings involving FTX … with an enhanced reputation as a solid digital assets jurisdiction.”
However, it seems like only Davis holds this sentiment.
Outside of The Bahamas, much of the criticism surrounding FTX has the accompaniment of lashes at The Bahamas as a regulator of the digital assets space.
Some forums that have hosted former FTX Chief Executive Officer Sam Bankman-Fried say publicly that they believe the government and regulators were too close to FTX and its executives.
The article writer closes his thoughts by connecting the Bay Street Boys’ moniker to FTX’s decision to set up shop on “Bay Street”, though FTX was headquartered on West Bay Street.
“In 2020, the Bahamas passed laws that sought to turn the nation into a crypto powerhouse. And not long after, Bankman-Fried set up a new FTX headquarters on — yes — Bay Street,” said Mihm.
“In retrospect, his arrival confirmed the prescience of a British colonial official writing about The Bahamas in 1961.
“‘This particular territory,’ he complained, ‘attracts all sorts of financial wizards, some of whose activities we can well believe should be controlled in the public interest’.”