Kevin O’Leary Blames Binance for FTX Collapse During Senate Hearing
The collapse of the cryptocurrency exchange FTX can be traced back to actions taken by Binance, according to investor Kevin O’Leary, who testified before a U.S. Senate committee on December 14 regarding the scandal that rocked the crypto industry.
O’Leary, who was a paid spokesperson for FTX, revealed details from his conversations with former CEO Sam Bankman-Fried (SBF) days before the exchange filed for bankruptcy. In his testimony, he inquired about how customer funds had been used over the previous 24 months and learned that nearly $3 billion had gone toward repurchasing shares of FTX owned by Binance.
When pressed by Senator Patrick Toomey about the reasons for FTX’s failure, O’Leary posited that a rivalry existed between the leaders of Binance and FTX, indicating that regulatory issues lay at the heart of this conflict. He explained:
“Apparently, according to Sam Bankman-Fried, CZ would not comply with regulators’ requests in different jurisdictions to provide the data that would clear them [FTX] for a license. The only option the management and Sam Bankman-Fried had was to buy him out at an extraordinary valuation close to $32 billion.”
O’Leary attributed FTX’s shortcomings, in part, to the pressure resulting from Binance’s actions and speculated that Zhao’s choices were influenced by a desire to push down the price of the FTX token (FTT). This came after Binance liquidated its FTT holdings in early November, which O’Leary described as a tactical move.
“In my view, my personal opinion, these two […] in an unregulated market […] with this incredible business in terms of growth were at war with each other, and one put the other out of business, intentionally. Now, maybe there is nothing wrong with that, maybe there is nothing wrong with love and war, but Binance is a massive unregulated global monopoly now, and they put FTX out of business.”
In light of the industry’s turmoil, O’Leary also advocated for a comprehensive regulatory framework for cryptocurrencies, contending that the sector’s crisis has the potential to weed out inexperienced executives and precarious business models. He stated:
“This nascent industry is culling its herd. Going or gone are the inexperienced or incompetent managers, weak business models, and rogue unregulated operators. […] Other jurisdictions have already implemented such policies and are now attracting both investment capital and highly skilled talent. In the U.S., we are falling behind and losing our leadership position.”
Reportedly, O’Leary was compensated nearly $15 million for his role as an FTX spokesperson, only to find himself losing over $10 million of his tokens when the exchange collapsed.
