Kevin O’Leary said the Securities and Exchange Commission levied some “serious” allegations in the 136-page charging document the agency issued against Binance on June 5, telling Cointelegraph in an interview that he believes founder and CEO Changpeng Zhao is in a “tough” spot.
O’Leary, a venture capitalist and CNBC personality known more colorfully as “Mr. Wonderful,” was an investor in crypto exchange FTX prior to its November collapse, and has been open about losing $15 million from his gig as a paid spokesman for the company.
Some observers attribute FTX’s failure to a string of events that followed an exchange on Twitter between its 31-year-old founder and CEO, Sam Bankman-Fried, and Binance CEO Changpeng “CZ” Zhao — who briefly suggested, amid FTX’s collapse, that he was open to bailing the company out. But he quickly ruled out the possibility of making an offer, to Bankman-Fried’s chagrin — and, perhaps, to O’Leary’s bank account.
You won, @cz_binance.
There’s no need to lie, now, about the buyout.
We initiated conversations around buying you out, and we decided to do it because it was important for our business.
And while I was frustrated with your ‘negotiation’ tactics, I chose to still do it.
— SBF (@SBF_FTX) December 9, 2022
O’Leary nonetheless said he felt sympathy toward the 46-year-old CZ, whom the SEC has targeted with allegations that he mishandled customer funds by transferring them between entities he controlled — including north of $20 billion between Binance and a company called Merit Peak.
“They’re going after CZ personally,” O’Leary said. “That’s tough. I mean, you have to have a little compassion for him.”
Cointelegraph: What should investors make of this lawsuit? Is it going to cripple the market? Do regulators have a case?
Kevin O’Leary: If you think about why the crypto market is “stuck,” why it’s not advancing, it’s because there’s no new money coming into it. There’s no institutional capital. […] And so, when you see a constant flood of litigation against exchanges and charges by regulators — that just scares away institutional money.
I think everybody’s figured that out, in addition to the regulators themselves — and the legislators and the lawmakers. They’re tired of the rogue nature of this space. They’re sick and tired of holding hearings when the next guy blows up with $6 billion. Their constituencies are mad. They’re just tired of it.
There’s no emotional support at all on the Hill [for crypto] anymore, because when it was a nascent industry, there was a lot of promise — but now it’s just fraud, and now it’s just opaqueness and lack of transparency and allegations of commingling customer accounts and all of this stuff. This is taking crypto “Mr. Wonderful” three years, and so everybody’s tired of it. They want to change the page. We’re seeing this movie play out every few months now.
Related: The outcome of SBF’s prosecution could determine how the IRS treats your FTX losses
So, if finance is the last shoe to drop, so be it. Let’s get it over with, and we can start afresh. I think there’s a real tonality today within the institutional market about turning the page. If you have to sacrifice a few rogue operators, if these people are going to get charged and have to be litigated, so be it. I mean, we gotta move on.
CT: We’re seeing a lot of allegations against Binance similar to those against FTX in terms of manufacturing trading volume, encouraging VIP customers to bypass Know Your Customer requirements with VPNs, and transferring customer funds to the tune of $20 billion to another entity called Merit Peak. And its chief compliance officer even said at one point — according to the SEC — it was “operating as a fking unlicensed securities exchange in the USA.” What do you think are the odds of criminal charges coming out of this?
KO: It’s an unknown. But you’ve seen this movie before. Just last November, you saw this movie — they called it FTX Day. This is FTX II. I mean, I don’t know. Nobody knows. It’s all speculation, but these are serious charges, and there are a lot of them. If any of these allegations are true, that’s an extremely difficult place.
Plus, they’re going after CZ personally. That’s tough. I mean, you have to have a little compassion for him. He’s the founder of the world’s largest exchange. But I think he’s going to run out of oxygen in terms of just what jurisdictions are going to let him operate when the No. 1 regulator on Earth has made these allegations and filed these charges. This is not a good situation. There’s no good news here. I don’t know how anybody could make good news out of this.
CT: There are two components in the case. Obviously, one is the allegation of misconduct. The second is the more basic element required for the SEC to pursue a case — which is the idea that Binance is a broker-dealer and clearing agency…
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