Just over seven months after the fall of Sam Bankman-Fried and his crypto empire FTX, another king of the emerging blockchain-powered financial services industry has found himself in the crossfire of regulators.
About 46 years old is billionaire Changpeng Zhao and his Binance empire. Zhao, known by the initials CZ in the crypto space, and Binance, the world’s largest crypto exchange, have been accused by the Securities and Exchange Commission (SEC) of mishandling customer funds and lying to regulators, in an effort to circumvent US laws, putting customers’ funds at risk. .
The Wall Street regulator is asking the court to issue an injunction that would make it difficult for Binance to do business in the US unless it accepts to bow to the SEC, which is also seeking unspecified fines on the platform.
Binance denies the accusations and says the regulator is trying to get publicity. But for Kevin O’Leary of the hit TV show Shark Tank, the complaint and charges are very reminiscent of FTX and Bankman-Fried. So he believes that Binance has no future.
O’Leary, who has crypto investments and is a strategic investor in WonderFi, spoke with TheStreet; Notes have been edited for clarity. WonderFi It is a group that operates a wide range of crypto platforms.
TheStreet: What do you think of the allegations against Binance and CZ?
O’Leary: I’ve heard these claims before. It was called FTX.
Not only are these accusations by the SEC (against) Binance and FTX extremely serious. They are all sued into oblivion. And in a way, that’s a good thing. It’s time to crack down on rogue players, bad scammers, and some ways to contact the pioneers, but there are way too many rogue activities to let us out, and now that’s one way.
TheStreet: Do you think there has been rogue activity on Binance?
O’Leary: I don’t know what to believe. These are really serious charges. There are now two organizations chasing Binance. (In March, the US CFTC sued Zhao and Binance for allegedly allowing US residents to buy and sell cryptocurrency derivatives while the company is unregistered.)
But what it will do is scare institutional capital off the platform. This has already happened. Over a billion dollars in the last few hours. If you’re an institution, you won’t want to do business with them because they don’t adhere to SEC standards, and most institutions globally invest money in the S&P 500. They have to be compliant. The reason why Bitcoin, the large cryptocurrency exceeding $30,000, has no new buyers. There is no point while all these accusations, lawsuits and allegations continue. It only scares away institutional capital.
These are all really serious. And why would the SEC raise these accusations if they have no basis or merit? This is what institutional investors are asking for. And how this ends, I have no idea but I can tell you, I’m glad I’m not a Binance shareholder and I’m very happy. I do not have an account (with Binance). And I think a lot of people are saying the same thing now, because they (the SEC) made a valid recommendation in the US at least to freeze Binance’s assets and put them under court jurisdiction. There is nothing good about that news.”
TheStreet: What would you recommend to an investor with a Binance account?
O’Leary: Take off your assets and find a jurisdiction like Canada, Switzerland, Australia or England as they have compatible regulated exchanges there. And that’s what I did. I have moved all my assets to Canada. I use Bitbuy.
I think Binance will have a hard time operating in any jurisdiction, under SEC scrutiny. The Securities and Exchange Commission (SEC) is probably the most important regulator on earth, and most other regulations and markets follow their lead, and I think everyone knows that. So no good news at all here. no job.
TheStreet: What is the future of Binance?
O’Leary: I don’t think it has a future. I think what happens going forward is either selling his assets to someone willing to disclose ownership, possibly paying billions in fines to the SEC. I have no idea. I think they unsuccessfully tried to do this, and ended up in litigation.
I think volume has slowed dramatically over time, as regulated exchanges are starting to pick up their accounts. I mean, it’s okay if you’re in a rogue state, don’t care about regulation or are happy breaking laws in your own country. I’m not. 99% of investors don’t want to do that. So where do you go and continue to buy? It’s a great question.
I think what is happening here is the end of an era of unregulated, unregulated cryptocurrency broker trading, to a new era of new management. Once they work in a compatible way and integrate with the financial systems of the world, because the promise of cryptocurrencies does not disappear. It’s a huge asset in terms of technology for payment systems, and potentially store-of-value. But the point is, the days of scammers, scammers, and unregulated exchanges are (over).
I think it’s a good thing. So my guess would be that five years from now, all of these pioneers, all of these are, in some ways, great entrepreneurs. I mean, you have to commend CZ because he built a multi-billion dollar company. Maybe it should have become compatible a few years ago. But the history books will decide that, but I think a new generation of managers will come along. And none of the roles here today will be including CZ.
TheStreet: How do you explain the price hike of BNB, the token released by Binance?
O’Leary: BNB’s market cap is around $50 billion (actually $44.4 billion according to CoinGecko). Almost 50% of it is (held) in only 10 wallets. What happens if one of those wallets wants to be sold? Haven’t we seen this movie before with FTX? Who else owns these wallets? I have no idea. Nobody does.
I don’t know what value you really have. I think this is very worrying. I would be very worried about that. And I’m sure people are too. I don’t think this is, in my opinion, a very good investment.
TheStreet: Do you still believe in bitcoin?
O’Leary: I didn’t believe in bitcoin until the regulators opened the first market to do so. I bought my first Bitcoin in Canada, where they created their first ETF with the underlying asset being Bitcoin. We still don’t have that in the US. Next, we have an Ethereum-based ETF, so you can invest in the Canadian exchanges like I did. I own a piece of the stock exchange and have all my assets there. I have millions of dollars strapped in there. And I feel safe because the regulator makes sure the assets don’t get mixed up.
I mean, how often do you have to hear a regulator say, “Oh, they mixed up the accounts.” We’ve heard this movie over and over again, it just gets boring. I’ve watched the movie many times, and people are unhappy. They want to change.
I believe today should be celebrated as the beginning of a new era in cryptography. Get rid of the old and embrace the new. That’s simple.