Diplomatic Notes

Lessons from FTX debacle

Recently in the news, The Bahamas has come under the spotlight in light of the colossal collapse of cryptocurrency exchange FTX. While many were quick to point the finger at the Bahamas government, but I do not feel we should be so quick to pronounce judgment. The Bahamas, through successive governments, has been actively seeking ways to diversify its economy and the digital currency world has appeared to be the new “gold rush’’ of the 21st century. So, it would make sense for The Bahamas to take advantage of this new opportunity before others capitalized on it and we are left in the shadows hoping to get in. I have no issue with our pursuit of the digital economy and the cryptocurrency markets. 

While our pursuit was noble and appeared to be bringing favorable results, the problem as I see it was in the details and due diligence. I am commenting with only a cursory knowledge of the facts, but there are several things that caught my attention, that should serve as lessons to The Bahamas going forward. We should not feel ashamed because FTX Chief Executive Officer Sam Bankman-Fried had the ear and was in the inner circle of the most prominent economists in the world, including the World Economic Forum and others. He was obviously well connected and respected in the digital and traditional economic space.

The mistake we seemed to have made is that like others, we may have been enamored by his apparent success and as a result failed to exercise the essential due diligence that should apply to any and all investors. In The Bahamas we have regulatory bodies that, according to reports, should have seen some of the red flags that are now quite obvious. One is that FTX allegedly did not have a traditional board of directors and operated several companies owned by the same individual and his small group of young friends. Apparently this allowed him to shift funds from one company to the other without creating an immediate alarm.

We must ensure going forward that we hold firm to the governance principles that ensure transparency and accountability, and not be bamboozled by the promise of donations and contributions to The Bahamas. Yes, we should continue to go after investors who bring value to The Bahamas, but we should do so soberly and with caution. Background checks, examinations of corporate structure and business models should be a prerequisite to accepting and sanctioning any investment. 

Jesus once stated that, “No man should build a house before he first counts the cost.” This tells us that we need to make sure that anyone coming to The Bahamas can finish or sustain what they have built. In this case, it seems that perhaps we were enamored by the personality and charisma of the  young investor and did not fully utilize the governance mechanisms we put in place with the Digital Assets and Registered Exchanges Act. As I mentioned previously, my knowledge is cursory at the moment, so I cannot definitively say that the Securities Commission of The Bahamas erred or failed in its oversight. What I can say is that there are and will be many other investors coming to The Bahamas, and we must be prepared to accommodate the legitimate investors and identify those who could tarnish our name and brand. 

We must always practice due diligence in overseeing our affairs. I hope that this debacle does not prevent or stifle the growth of the digital economy. It appears that cryptocurrency is a part of the permanent economic landscape and therefore represents a tremendous opportunity for whoever is able to harness it. The Bahamas should be a part of this equation, but we must proceed with caution and care. 

• Pastor Dave Burrows is senior pastor at Bahamas Faith Ministries International. Feel free to email comments, whether you agree or disagree, to pastordaveburrows@hotmail.com. I appreciate your input and dialogue. We become better when we discuss, examine and exchange. 

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