Just 16 months ago, Shark Tank judge Kevin O’Leary announced that he had taken an equity stake in the crypto exchange FTX, a deal that also paid him nearly $15 million to serve as a corporate ambassador. At the time, he assailed much of the cryptocurrency landscape as “fraught with risks that I can not take.” But he said that FTX stood out as a beacon of responsibility that satisfied O’Leary’s “own rigorous standards of compliance.”
On Thursday, anchors of the CNBC program Squawk Box questioned O’Leary’s rosy assessment in light of FTX’s rapid implosion last month, and a ceaseless series of revelations demonstrating that its compliance protocols were abysmal.
“We all look like idiots. Let’s put that on the table,” O’Leary conceded, referring to himself and other investors. “We relied on each others’ due diligence.”
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O’Leary, who has branded himself on Shark Tank as “Mr. Wonderful,” said on CNBC that he was enticed to invest in FTX because its founder and CEO, Sam Bankman-Fried, was American, and there were limited investment opportunities in U.S. crypto exchanges. Even Bankman-Fried’s “parents are American compliance lawyers,” O’Leary said.
Squawk Box host Andrew Ross Sorkin noted that O’Leary’s decision to get into bed with FTX marked a dramatic change in his opinion of crypto. In 2019, he had blasted Bitcoin as a “useless currency,” complaining that he had once tried to use crypto as part of a Swiss real estate deal and found it to be “garbage” and “worthless.”
O’Leary tried to explain his about-face, saying he saw crypto gaining traction in Switzerland, Canada, and Australia. “I said, ‘Wait a second, [the] world's changing, I’ve got to be an investor,’” he said Thursday.
Millions Vaporized
O’Leary insisted that virtually all of his $15 million payday has disappeared. Some of the original figure went to agent fees, he said. A $1 million equity stake in FTX has vaporized, as has $9.7 million he put into crypto assets.
The Shark Tank judge claimed that other investors had approached him seeking a way to acquire a piece of FTX and he rebuffed them because he was a paid spokesperson. “Not a single dollar that I lost is anybody else's money,” he said.
After the collapse, O’Leary said, he approached Bankman-Fried demanding answers. The most obvious question: “Where did the money go?”
“My account has a zero in it, and there are no accounting records,” O’Leary recalled telling the fallen billionaire.
According to his account of the conversation, Bankman-Fried said much of FTX’s liquidity was wiped out after buying out a stake that one of its rivals, Binance, held in the firm.
Still a Believer?
O’Leary recently stood by Bankman-Fried, who is facing multiple law enforcement investigations and questions about whether he defrauded customers.
After Bankman-Fried appeared at The New York Times’ DealBook conference on Nov. 30, where he sought to salvage his crippled reputation, hedge fund billionaire Bill Ackman tweeted that he believed the 30-year-old was “telling the truth.”
O’Leary concurred, writing, “I lost millions as an investor in @FTX and got sandblasted as a paid spokesperson for the firm but after listening to that interview I’m in the [Bill Ackman] camp about the kid!”
O’Leary said he will participate in inquiries into the business, starting by testifying on Capitol Hill next week. As for Bankman-Fried, Mr. Wonderful plans to go “on a journey” with his ex-associate to track down the missing funds and determine whether customer assets were misused.
The consequences for potential misconduct, he suggested in their conversation, should rest on Bankman-Fried’s shoulders: “Wherever the chips fall, that’s on you.”
