FTX hearing

Former Paid FTX Spokesman Kevin O’ Leary Blames Its Downfall on Binance

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Following yesterday’s congressional hearing on the downfall of FTX, today the FTX hearing moved to the Senate, the upper chamber of the US Congress. 

Four experts from the fields of law, business, financial regulation and journalism testified candidly before a bench of senators in a discussion that centred around FTX’s implosion, but with a wider consideration of the impact on consumers, and potential regulatory framework that US regulators could impose on the cryptocurrency industry, among other topics. 

Around one hour into the three hour discussion, Junior US senator for Pennsylvania, Pat Toomey asked the forthright question of “why do you believe FTX failed?” to Canadian business entrepreneur Kevin O’Leary, a figure most publicly recognised as a panel investor on Shark Tank. 

Earlier in the FTX hearing, O’Leary, widely known as ‘Mr. Wonderful’ from his days on Shark Tank, provided clarity on his earnings as former FTX spokesperson, a position for which he has been widely criticised by the crypto community over the past month. 

In August 2021, O’Leary signed an agreement with FTX to become a paid spokesperson. 

Other high-profile celebrities associated with promoting the exchange include Tom Brady, Stephen Curry, Gisele Bündchen, Larry David and Shaquille O’Neal, among others – each of whom were named in a class-action lawsuit in the state of Florida last month. 

O’Leary received US$15 million for his services, plus an additional US$3 million to cover due taxes. In the Senate, the entrepreneur claimed that US$10 million of this salary was invested into undisclosed tokens on the FTX exchange, and is now most likely worthless.

Providing an audacious and calculated reasoning to the demise of FTX, O’Leary began his remark by stating:

“After my accounts were stripped of all of their assets and all of the accounting and trade information, I couldn’t get answers from any of the executives within the firm, so I simply called Sam Bankman-Fried and said ‘Where is the money Sam?’” 

Turns out Sam no longer had access to the server, so he simply didn’t know. Shocker. 

Was SBF at war with CZ?

Binance was an early investor in FTX, acting as the sole investor in a December 2019 corporate funding round. Prior to this, FTX had facilitated two seed funding rounds, the latter valued at US$8 million. 

In July 2021, Bankman-Fried and Binance’s CEO Changpeng ‘CZ’ Zhao were the two biggest shareholders of FTX. That was until Bankman-Fried decided to repurchase the full allocation of shares from Binance in an undisclosed deal. 

Paraphrasing SBF’s opinion on the matter at the time, O’Leary passionately claimed that these “frenemies”, as he referred to them, “had a disagreement, a falling-apart”, before stating: 

“Every time we went to get licensed in different jurisdictions, CZ would not comply with the regulators requests in these different jurisdictions to provide the data that would clear them for a license. He withheld it, according to Sam Bankman-Fried.” 

Speaking at the FTX hearing, O’Leary said that this apparently forced SBF’s hand in buying out his competitive partner at what an astonished O’Leary described as “an extraordinary valuation of $32 billion” which “stripped the balance sheet of assets.” 

“You ask me why it [FTX] went bankrupt? Go to the last week.” 

Sparring with a psychopath 

In the days prior to FTX’s collapse on November 11, CZ tweeted that Binance would be liquidating all FTT tokens on their balance sheet in a way that “minimises market impact” after revelatory findings came to light over FTX’s displaced financial structures.

Days later, SBF privately appealed to CZ for assistance amidst a “significant liquidity crunch.” 

Binance then entered a period of due-diligence with the prospect of acquiring FTX on November 10, after which SBF tweeted that CZ had been his sparring partner in the competition for crypto users over the years, pathetically conceding “well played; you won.” 

On November 17, CZ spoke at the Milken Institute in the United Arab Emirates, reflecting on Binance’s decision not to pursue a deal, and his overall involvement in the FTX saga. 

CZ claimed that “when [SBF] came to me, I knew he was desperate. I knew that I had to be the last person on Earth he would reach [out] to.”

After commencing due-diligence proceedings, CZ revealed that “it didn’t take us long to figure out that there were way bigger problems than we imagined. It was beyond our scope.”

And on the sparring partner’s tweet, CZ remarked: “I think only a psychopath can write that tweet.”

Kevin O’ Leary at the FTX hearing

Concluding his testimony in the Senate, O’Leary chose to side with the guy behind bars who once paid him US$18 million, unequivocally declaring that the world’s largest exchange Binance wilfully toppled their biggest rival in an act of war.

“In my view, my personal opinion, these two behemoths that owned the unregulated market together and grew these incredible businesses in terms of growth, were at war with each other. And one put the other out of business, intentionally.” 

“Maybe there’s nothing wrong with love and war, but Binance is a massive unregulated global monopoly now. They put FTX out of business.” 

Kevin O’ Leary, FTX investor

When O’Leary went on CNBC’s Squawk Box show on December 9 and backed Bankman-Fried to the detriment of Binance, CZ brutally called into question his integrity within the FTX debate.