The financier and bon vivant Wallace Groves had little use for the law or social norms. His wife, a former Hollywood starlet, left him in 1937 after he’d had their infant son briefly kidnapped from their glittering Park Avenue triplex apartment. A day after the supposed abduction, authorities arrested Groves on the tarmac at Newark airport, in the company of two women whom Time magazine coyly described as his “girl friends.” Monaei (pronounced “money-I”) Groves soon ended up with a divorce settlement worth about $3 million in today’s currency. New Deal–era federal prosecutors, bent on reining in what President Franklin D. Roosevelt called “privileged princes of new economic dynasties,” indicted him the following year on multiple counts of fraud and conspiracy.
Monaei’s testimony helped put Groves in a federal penitentiary. But his conviction didn’t break his spirit or teach him the error of his ways. Historical accounts indicate that he left prison with a new wife—Monaei’s former hairdresser—a ticket to the Bahamas, and a plan that would change the world. What started as his personal quest to rebuild a fortune turned a balmy Caribbean archipelago into a powerhouse of the global economy and a model for what we now call the offshore financial system. Groves started by taking over a sleepy lumber business on the island of Grand Bahama, but by 1955 had amassed so much wealth and political capital that he persuaded the colonial government to do something extraordinary: Authorities granted him carte blanche to rule and develop 50,000 acres—about 15 percent of the island, including what is now the city of Freeport—that would be immune from taxation and regulation for the next 99 years.
The Bahamas, which gained independence in 1973, are well known today as the former home of Sam Bankman-Fried’s cryptocurrency exchange FTX, whose meltdown cost investors $8 billion. But the company would never have set up in the island nation if not for Groves, the founding fraudster of offshore finance. Groves pioneered the model for turning British colonies with lax financial regulation and minimal taxation for expats into snug harbors for foreign capital seeking refuge from other countries’ laws. A generation later, Groves’s imitators expanded his model to the Cayman Islands, the British Virgin Islands, and other territories of the fading British empire.