Last month, the cryptocurrency industry experienced a seismic shakeup as FTX—a Bahamas-based crypto exchange led by the young ex-billionaire Sam Bankman-Fried—collapsed. It turns out that FTX was riddled with fraud, and many of the company’s assets are still hidden or missing. Quite understandably, most of the reporting on FTX’s wrongdoing has focused on how FTX defrauded investors, customers, and the U.S. government. But there is another aspect of the case that deserves further scrutiny: the possibility that FTX corrupted Bahamanian regulators, and that this corruption facilitated the company’s other types of malfeasance.

When Bankman-Fried co-founded FTX in 2019, the company was located in Hong Kong. But as the crypto industry boomed, regulators in many jurisdictions, including Hong Kong, began to crack down on it. Other jurisdictions, such as the Bahamas, sought to attract crypto firms by pitching themselves as safe havens from onerous regulations. In 2021, FTX relocated to the Bahamas; the company’s statement announcing the relocation declared that FTX’s executives were excited to form a “close working relationship” with Bahamian regulators.

The nature of that relationship remains something of a mystery. It is possible that FTX’s substantial influence over Bahamanian government policy on crypto regulation arose from legal (though problematic) rather than illegal conduct. For example, FTX and its executives spent lavishly on local real estate, donated large amounts to surrounding communities, and offered many new job opportunities for Bahamanian citizens, while Bankman-Fried was also a major source of funding for the ruling party and its initiatives. Yet there are grounds for suspicion that something more nefarious was afoot.

Indeed, some believe that FTX illegally funneled money to Bahamanian regulators in exchange for favorable treatment. Much of that suspicion derives from FTX’s real estate purchases, including the company’s $60 million purchase of a headquarters that was never built and that has remained untouched for months. There are also suspicions concerning FTX’s many charitable donations, which flowed through the country and its government, and which may have been a means by which FTX disguised bribes to government officials.

We do not yet know if such corruption in fact took place, and the Prime Minister of the Bahamas has denied many of these accusations. Further investigation can reveal whether these allegations are true. But the concerns here are not just about this one specific case. Rather, we need to be alert to the risks that in the crypto industry, as in so many other industries, corruption will undermine effective regulation, especially as jurisdictions compete for mobile businesses and capital. We have seen an analogous phenomenon with respect to environmental protection: There is plenty of evidence that firms use corrupt means to weaken or evade environmental regulations, and that polluting firms relocate to countries where such corruption is easier (see, for example, here and here). The crypto industry arguably poses an even higher risk of corruption, because avoiding centralized regulation is part of the industry’s ideology, and bribery is one means of doing so. And if corruption produces excessively lax regulation of crypto firms, the consequences could be disastrous. There are already well-founded concerns that crypto is facilitating money laundering, fraud, bribery, trafficking, and other illicit behavior; widespread corruption will undermine the many proposals to deal with these issues.

There are a few things that countries like the Bahamas can and should do to address corruption vulnerabilities associated with the crypto industry (and more generally), several of which are suggested by the suspicions swirling around FTX. First, countries should pass and enforce laws requiring far more detailed recordkeeping for transactions like real estate purchases and charitable donations, to make it easier for investigators to figure out how money was spent. Additionally, countries should adopt stronger conflict-of-interest laws. FTX curried favor with officials in both the Bahamas and the United States, and while many of these influence activities were likely legal, the close relationship between government officials and the company may have reduced the incentive to investigate FTX before the company’s collapse; these overly cozy relationships may also have made it easier to cross the line from legal lobbying to illegal corruption. Weak enforcement of laws like the Bahama’s Public Disclosure Act—which requires certain officials to regularly disclose their assets, liabilities, and incomes—may have further contributed to the problem, especially if some officials held digital assets through FTX.

In addition, countries like the United States can and should impose compliance standards on crypto firms operating within their national boundaries, regardless of where those firms are based. When possible, these countries could use tools like the FCPA or the U.K. Bribery Act to prosecute firms that bribe foreign officials, as long as the broad jurisdictional requirements of these statutes are satisfied.

FTX’s fraud and collapse has left the Bahamanian economy in tatters and its reputation in shambles. The chaotic aftermath of the firm’s collapse shows how every country benefits from robust regulation. Corruption threatens to undermine such regulation, and for this reason the Bahamas, the United States, and the world at large need to squarely address the very real problem of corruption in the crypto industry, using whatever legal tools they have at their disposal.