Binance is Liable for Collapse of FTX: Kevin O’Leary
- Shark Tank’s Kevin O’Leary stated that Binance crypto exchange was responsible for the collapse of FTX.
- O’Leary revealed that he was told by FTX that over $3 billion were used to repurchase shares of FTX owned by Binance.
- He noted that FTX subsdiary LedgerX remains solvent because it was regulated by the CFTC.
- He believes that US is losing its leadership position due to delay in crypto regulation while other nations have already implemented policies.
The popular multi-millionaire investor and former critic of Bitcoin (BTC) turned supporter, Kevin O’Leary, has stated that the world’s biggest crypto exchange, Binance, is responsible for the collapse of Sam Bankman-Fried’s crypto exchange, FTX. The “Shark Tank” star spoke at the Senate Committee on Banking, Housing, and Urban Affairs hearing on the collapse of the FTX, which dealt huge losses to investors.
According to the statement from O’Learly, Binance played a crucial role in the collapse of FTX and its bankruptcy in early November. Right around that time, the CEO of the world’s largest exchange, Changpeng Zhao, stated that his firm would sell all of its FTX Token (FTT) token holdings, a move that was unexpected by the crypto industry.
The announcement from Binance co-founder Changpeng Zhao, also known as “CZ” in the crypto space, resulted in a liquidity crisis on the exchange, which was already hiding its financial conditions in the first place, as per several reports. In one weekend, over $3 billion was drained from the exchange, following which withdrawals were halted and FTX filed for bankruptcy.
The collapse of FTX led to associated firms, like Alameda Research, FTX US, and BlockFi filing for bankruptcy as well. Additionally, O’Leary called for increased regulation of the crypto sector and added that the only subsidiary of the exchange that remains unaffected is LedgerX because it is regulated by the Commodity Futures Trading Commission (CFTC).
O’Leary testified that during the time he had relationships with FTX, he asked for the whereabouts of the funds. The multi-millionaire was told that money, around $3 billion, was being used to repurchase the shares of the crypto exchange that lay with Binance. The CZ-led exchange held about 20% of its rival’s stocks because it was one of the first investors in FTX and had incubated it as well.
Talking about the rivalry between the two exchanges, Kevin O’Leary stated:
“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.”
The TV personality and investor said that Binance and FTX were at war when asked by Senator Patrick Toomey why FTX failed.
“I have an opinion. I don’t have the records,” he added. O’Leary also revealed that the core of war between the two exchanges was regulatory concerns. As CZ’s exchange held 20% of FTX, it had to follow certain rules and regulations so that the latter could get regulatory approvals in different jurisdictions.
“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,” said O’Leary.
Additionally, O’Leary also noted that other countries have started implementing crypto regulations to protect investors from financial mishaps. However, the United States has yet to bring forth a set of regulations to protect investors.
The multi-million noted that “other jurisdictions have already implemented such policies and are now attracting both investment capital and highly skilled talent” and added that the US is “falling behind” and losing its “leadership position.”
On the other hand, Sen. Cynthia Lummis (R-WY), an American attorney and politician serving as the junior United States senator from Wyoming, stated that it is crucial to “separate digital assets from corrupt organizations.”
“FTX is good old fashioned fraud,” Lummis said. “Mismanagement, failure of people, inadequate controls is what’s on trial. We need to regulate this business and lay digital assets on top of our existing financial framework.”
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
