THE story of the collapse of FTX, the crypto exchange that so spectacularly fell apart, is one that is divided into two parts.
There is the international story – which primarily affects the customers who put their money into FTX’s hands, and who now join the list of creditors seeking billions from the fallen company.
Then there is the local story.
At its most basic level, there are the employees of FTX who find themselves suddenly adrift after working for a company that talked big and spent big but it turns out didn’t take care of the business. There will be people suddenly looking for work, who thought they had a secure career at FTX.
Then there are the organisations that had been given donations by FTX. In this column, we had talked of how FTX had seemed to be making a name for itself as a good corporate citizen, supporting non-profit organisations and groups that needed a little extra money to get by.
Many of those groups are now counting their blessings for what they did receive, and counting the costs of any holes in anticipated donations for the future.
Groups such as Lend A Hand Bahamas were given a pledge of $500,000 in March, with a promise to match donations up to a further $500,000. In yesterday’s Tribune, Lend A Hand said that its plans would remain unaffected despite the collapse of FTX – although its planned community centre, still to begin construction in the new year, was to bear the name of the company in the original plan. That may change, of course, given the albatross that name has become.
BAARK was another organisation to benefit from FTX’s generosity, and it confirmed that it had received $100,000 that had been pledged. There were many other organisations too – and we hope those promises had been made good before the collapse.
Who else received funds? Well, the FNM chairman said he was unaware of any donations from the company, and the PLP chairman responded with a brief “Nope” to the question of any donations there. It is not implausible there would have been political donations – certainly there were donations to political bodies in the US by FTX, notably to the Democrats.
Yesterday, Prime Minister Philip “Brave” Davis said he had no knowledge of whether the PLP received any money, or whether any Cabinet ministers held any FTX digital wallets or portfolios. For himself, he said he did not hold any such wallet, and denied that the government had invested in any form with FTX.
With such a huge collapse, there of course are other questions about what our country’s exposure is amid the loss. Were all funds deposited properly with NIB? What contracts remained outstanding for the construction of the headquarters and who will be exposed to that loss? What will happen to assets in The Bahamas, such as the land that FTX owns?
There are also legal concerns. For example, The Bahamas moved to freeze FTX assets – and yet after that action, it appears FTX co-founder placed the company into bankruptcy the following morning, when he should no longer have been in control of the business.
Does our legal system have the power to hold sway over actions already underway in the US legal system? Will there be a tug-of-war over jurisdiction?
On the international scale, it is all about the funds of the customers. On the local scale, it is all about our level of exposure amid the losses, and our authority to determine what will happen next.
As one source told The Tribune, “This is an American problem by American citizens, and we are just the venue, but we are going to get the hit for this and no politician has the temerity and fortitude to stand up and defend us. There’s a lot of blame to be floated around. Nobody is getting the real problem. The jurisdiction is going to get a black eye here when we were the victim.”
The decisions made by FTX rest on the shoulders of FTX. Not one Bahamian was responsible for, as Mr Bankman-Fried said himself, taking $8bn from customers through its Alameda sister company and not delivering it to FTX. It was Mr Bankman-Fried who said it was his fault. It was him who – despite all that blame and all those failures – condemned regulators and claimed “they make everything worse”.
So we need to recognise that this particular Titanic sank on our shores, thanks to its errant captain – while we pick up the pieces of the damage it has caused us.
To that end, what we need to do is be clear in a full accounting of what was promised, what was paid and what was still owed. And we need to assert the authority of our courts where it is appropriate, to make sure those who were left out of pocket can gain at least some measure of restitution, rather than joining a long line in a US court where they may get next to nothing at all.
FTX’s collapse was astonishing in many ways – but we must be fastidious in noting what it means to us, and minimising any losses we may incur.