Life at the FTX Bahamas Compound

Bahamas would include the inside of a jail cell. BANKMN Freed and his inner circle at FTX and Alameda Research relocated operations to the Bahamas from Hong Kong in late The Bahamas based employees and executives seemed to enjoy what looked like a lavish island lifestyle, think yachts and penthouses with ocean views. But how much of that lifestyle was funded improperly? Is that the center of allegations and charges filed by everyone from the U s Department of Justice

to the Securities and Exchange Commission to the CFTC. The Department of Justice alleges that, among other things, SPF misappropriated customer deposits, and there's a brewing fights between officials in the US and local regulators and the Bahamas over just who is in charge of what. For more on how things shook out in the Bahamas in this unfolding story

were joined by Bloomberg Reports. Zeke Fox. You know, when this company was worth thirty billion dollars overnight, it was like, all right, so he wants to have Larry David in the ad. I guess you can afford it. But now it all looks very different. When this is like customer money, that was like allegedly, you know, wasted and Carli Wanna.

I did talk to a few people who worked in the crypto scenes, you know, some who were not from Bahamas, some who were from Bahamas, and across the board it sounded like people were saying, this does set us back and also sets us back with regards to Bahamas as a crypto hub. Hello to both of you, and thank you so much for taking the time. Thanks a lot. Thank you, Zeke. Why don't I start with you. You have one of the I think more interesting gigs at Bloomberg.

What is it that you do. I am mostly writing stories for our magazines, Bloomberg Business Week, in Bloomberg Markets, and I try and write about crazy things happening in the world of finance, whatever they are. There's been a lot of that, and we'll talk about one in particular, very shortly. Now zeke as a person who gets to write about those things, you know, you sort of get to look and be like, oh, that seems wild. I'm going to check that out. What prompted you to write

one of the first major profiles of Sam Bankman Freed. Yeah, I had sort of stopped paying attention to crypto for a while until I went to UH conference last year where I met Bankman Freed. He had just announced that he was renaming he was paying for the name rights to the Miami Heats Arena, and he was at this conference in Miami to celebrate, and it was almost like it was kind of like too crazy to be true.

There was like this twenty eight twenty nine year old guy who seemingly came out of nowhere and credit to Forbes, which had put them on their Billionaire's list, and written a story about him and said that he was worth more than twenty billion dollars, and apparently he was like this great trader who had had a crypto hedge fund and then he started in exchange, which became really popular overnight. And the part that like really struck me was he said that when he was a teenager he had decided

I really want to do good for the world. What's the best way? And he had fallen in with this group called effective altruists, who had convinced him that for someone with his math skills, volunteering for like an animal rights charity, something he'd done in the past, was actually not a good use of his time, and that the better thing to do would be to make a lot of money and give it away. And so, like when he was in college, he was like, all right, my plane is I'm gonna make a lot of money and

give it away. And then here he was, like, less than ten years later, apparently worth twenty billion dollars. So I just thought this was like a crazy story, almost like didn't believe it. I wanted to see it for myself, and yeah, that's what got me interested. And so you do this profile about this dude who had, at the time of writing not actually given away a lot of money. Is that correct? I mean depends how you define it.

But I went down to the Bahamas this February and at the time he told me, and I actually think this still checks out that he had given away something like a hundred or two hundred million dollars, which you know, a lot for a nine year old, but less than he had spent on marketing for ft X by that point, just even stuff that I knew about. There was like the stadium naming rights, there was a Super Bowl commercial.

But I went down there. I spent two days hanging out at their offices in the Bahamas, and I wrote a profile that you know, did not say, hey, look out for f t X. This place is sketchy. It was mainly about, Okay, this guy's making a lot of money on crypto. You may think that's kind of sketchy in itself. Is he really going to give it away? So of course, now I'm kicking myself that I didn't see a lot of red flags that like should have been obvious at the time. So February you go, you're

in the Bahamas, you write this profile. November December, you're back in the Bahamas for a very different kind of story. In November at all, like in one week, the whole thing blew up. What do you make of the spectacular collapse? Sam Bank and freeds f TS authorities and regulators are investigating whether f TX has mishandled custom were funds, and we heard about some of those stolen funds at the hearing, FDx groups collapse system from absolute concentration of control in

the hands of the group. Lots of investigations going on both here and in the Bahamas. F t X is one of these absolute travesties in the history of financial and like now Sam's been arrested. We've seen the criminal charges. But in early November it looked pretty clear that like he had taken the exchanges customers money and gambled it away using his hedge fund. But no charges have been filed. Yeah, no charges have been filed. So I decided to go

back and talk with Sam. He kind of answers questions if you asked them, so I thought that by talking to him, I might learn something about what had happened at ft X. After some texting, he invited me to his apartment in this crazy resort called Albany on the island of New Providence, which had not been part of the tour the first time. And as soon as I walked in, I could totally see why, because he liked to have this image that he really didn't care about money,

like he talked about. He drove a Toyota Corolla. He always wore the same kind of ratty clothes. He didn't do his hair. One time he testified before Congress and his shoes were laced into like a big knock because he just bought him at payless or something like that. So he was really going for this image that like money wasn't important to him. But this resort of Albany, I mean, I've never been anywhere like it. Like it's these eight apartment towers around this mega yacht marina and

there's like billionaires. There's a fracking billionaires like giant yacht out front. He definitely wouldn't have fit in there with his look. And then his apartment at this place cost thirty million dollars. At this point, there was a lot of like crazy rumors going around the tabloids that this is where he had lived with the other top executives and they had been Yeah, yeah, I don't think that's true.

It was almost being painted as like a Wolf of Wall Street type situation and really the opposite of the image she had been projecting. And he wrote that it was like an abandoned frat house. Yes, Like when I came in there, the first thing, the elevator opens into

the apartment. The first thing I noticed was like there were all these shoes because all these like FTX employees had been living or staying in this apartment and they had just fled, like when ft X was collapsing, they all left, and a lot of them hadn't taken their things. And in the bathroom there was it seemed like the maids, like the maid service had stopped. Like the bathroom there were like towels that needed to be done, dishes in

the kitchen. Sam led me to a small bedroom which seemed like it was probably one of the more modest rooms in the apartment, and that's where we we mainly talked. And at this point he hadn't done like eight million interviews, so it was it was more novel for me to hear some of his explanations about what happened. What was your immediate takeaway coming out of that conversation? Was this someone who seemed contrite? Was this someone who seemed confused?

Like what what was the vibe? So I really had no idea what to expect. I was struck by how similar he seemed. So the first time I met him, the way that he talked to his mood seemed like he was kind of chipper. He seemed kind of happy to talk about all this stuff. It was hard to sort of interpret why he was like that. But I would ask anything, and he'd just give these really long answers. He liked to get into like technical stuff about the value of the different like weird tokens that were on

Alambida's balance sheet or f tx's accounting system. But as I was thinking over like what he was saying, it was just a lot of it was not was not very plausible, Like it would take huge leaps of faith to believe some of this stuff. And it didn't seem like given that the exchange had just collapsed and people are reporting that it was like probably a massive fraud, it didn't seem still likely. His story just seemed incredibly unlikely. Carly.

You also went to the Palmas, and I should say I sent you to the Pomas and email and he was like, hey, can you get on a plane immediately after Thanksgiving? Thank you very much. And when you went there, you also encountered some of those incredibly fit older people in Linen, at the compound and on the island. What were your experiences. I didn't get up to the penthouse I did, however, walk around the grounds, I would say similarly.

I mean it was insane. There were like multi tiered yachts in the marina, really quiet, like weirdly quiet, and the beach was I luckily happened to get there like right before sunset, and I just kind of watched it. And that is the nicest suns that most beautiful beach I've ever seen. And it really was just incredibly pristine, despite the fact that I believe there was a golf tournament or classic going on that weekend. No, no traces of that where I was. You also went to the

Margarita Ville, Yes, why? So? Interestingly, the unsecured creditors raft X are still private. That's yet to be released in court documents. However, the unsecured creditors for Alameda have been released, and it's outside of insiders, and one of the biggest ones is the Margharita Ville in the Bahamas. They owe them over fifty dollars. So that was the question of, Wow, what happened there? How do you spend Margaritaville? Right right? Yeah? And why why the Margharita Ville? What was it? I

love the Margarita Ville, but still super weird. And is it a bar. That restaurant is a receipt, Yeah, I forget. Not everybody is familiar with margaryfl Margharita Ville. I mean it has a restaurant. You can go to various restaurants. There is a restaurant in Bahamas. But there is also a resort, the resort, as I learned when I called the restaurant and they said that I needed to call the resort. The restaurant is not affiliated with the resort.

They're separate. So it was in fact that Alameda owed the money to the resort. So went to the resort. Managers declined to comment. The staff, however, who worked there, were very forthcoming it. You know, they had interacted with and seen the f t X people, and they said that people affiliated with f t X had been staying at the Margharita Ville for several months. It was different people. They would filter in an outstaying for weeks or months at a time, depending on who you were. Um they

had about twenty rooms. There's the Margarita Ville resort, but there's all across the road there's a nicer resort that if you know Jimmy Buffett, which this is a Jimmy Buffett themed resort. It's a pun. It's called One Particular Harbor. Yeah, so the people affiliated with fd X, we're staying there and every day, on on work days, a shuttle would come pick them up in the morning and then drop them back off at the end of the day, you know,

late afternoon, early evening. UM staff said that they were they were kind, they were friendly that you know, they

would hang around the pool and the restaurants. Up next, more on Sam bank Win Freed and what he left behind in the Bahamas with my colleagues Zeke Fox and Carl Wanna, what was it like for the bohemians, Like, did you talk to when you were there, any of the other folks in the Bahamas crypto scene, any folks from you know, the government, the regulators who are now being confronted with questions about how they let all this

go down allegedly on their watch. I had an interesting conversation with a employee of ft X who was hired locally and he had been in charge. He was sort of like a gopher and a driver for them. So we've been around these people all the time. And he told me, like listen, these reports that these people were like going crazy are not true. He has said something to the effect of, like, bro, these were a bunch

of nerds, Like come on. And I asked Sham about some of his spending back on my first interview in February. Maybe it's too charitable to still believe this, but it seemed like what he was saying was like, listen, we're gonna make so many billions that like, this little amount of spending on like naming rights or say, putting employees up in a hotel when you could have found a cheaper one is like a rounding error. And you know, frankly,

I almost sort of believed it at first. You know, when this company was worth thirty billion dollars overnight, it was like, all right, so he wants to have Larry David in the AD. I guess you can afford it. But now it all looks very different. When this is like customer money that was like allegedly you know, wasted. Yeah, and I'll throw it out there too. That before going to Bahamas, I was in Miami and it was interesting because those were you know, their crypto hubs, but the

vibe was very different. I mean Miami is a really, really really big city, and it seemed like, well, fd X, how do u s headquarters that you know, was supposed to be moving there from Chicago, The footprint on that city wasn't as big among people who were in the crypto community. And while there are other crypto companies that have set their sights or their eyes on Bahamas or have at least some people there, I mean, talking to

people was just very different. Fd X really touted itself as, for one reason or another, a Bahamian company, and like Zeke said, they hired people who were on the island not only to work with local businesses, but also to hire people to do work with the crypto exchange itself. And so I did talk to a few people who worked in the crypto scenes, you know, some who were not from Bahamas, some who were from Bahamas, and across the board, it sounded like people were saying, this does

set us back. It also sets us back with regards to Bahamas as a crypto hub. Can I defend the Bahamas for a minute, Yeah no, look clearly like their oversight was lacking, But like the US just filed all these charges right once it collapsed, they found all the enough evidence to charge BigMan Freed with all this illegal activity, Like there was nothing stopping them from finding this stuff out earlier, and they didn't either. So I don't think the blame is entirely on the Bahamas for failing to

regulate this exchange. Well, I think one of the things that stuff really happening is a heroic amount of finger pointing right now, Like reading some of these filings and the statements from various regulators is I wouldn't say it's quite the level of drama as a soap opera, unless you are perhaps a person who works at Bloomberg and

thinks about things this way. But you know, you have these very feisty statements coming out from you know, the Bahamas Securities and Exchange Commission essentially saying John J. Area the third is ignoring our emails and misrepresenting everything that

we're saying. And then you have, you know, in court filings from various other folks people being like, we would like to assert that we have all the rights over this thing, and we're not sure why and how the Bahamas feels like they need to get involved, you know. So it's it's this sort of sovereign face off as

it were. And I think one one piece of context here is this is not the first time that something like this has happened, like multiple different Caribbean jurisdictions BA, Bahamas, Bermuda, Antigua that have at various points presented themselves. As you know, offshore financial centers have often had to reckon with wreckage when things go wrong, and I think we're seeing a version of this playing out in crypto. See as a person who's chronicled lots of financial weirdness over time. Where

do you think this is going to go from here? Oh, they were quick to file the charges because it was such a high profile case, but these things take like years to play out. So I mean the authorities have basically said they're looking at other people. There will be more more people charged, But I think we're only only just now was the Theorist case results, and like when

did that break? So I think we're gonna be hearing about this um for years And I doubt this is the last company to blow up in crypto, although like how many companies are left? More on that on future episodes of the podcast. Thank you Carly and thank you Ze for joining us today, thanks a lot. Thank you. You can find more of their reporting on the Bloomberg Terminal and on Bloomberg dot com, and be sure to check out our twice weekly newsletter, which is also called

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