Celebrity investor Kevin O’Leary testified before the Senate Banking Committee on Wednesday regarding the collapse of cryptocurrency exchange FTX, which he had promoted to the public.
FTX filed for bankruptcy last month after users discovered that the company was intertwined with sister trading firm Alameda Research; both were controlled by now-broke former billionaire Sam Bankman-Fried and a handful of amateur executives. O’Leary, known for serving as a judge on the reality startup show “Shark Tank,” told lawmakers in his opening statement that he lost the approximately $15 million in digital assets and equity he earned as a spokesperson of FTX but insisted that the industry still has upside potential.
“The collapse of FTX is nothing new. While this situation is painful for shareholders, employees, and account holders, in the long run, it does not change this industry’s promise,” argued the entrepreneur, who still has investments in other cryptocurrency companies. “Enron came and went and had no impact on the energy markets. Bear Stearns and Lehman Brothers’ demise had no impact on the long-term potential of American debt and equity markets.”
Beyond supporting efforts to create a “well-regulated stablecoin” backed by the dollar, O’Leary expressed support for new regulations on the broader cryptocurrency sector. “This nascent industry is culling its herd,” he added. “Going or gone are the inexperienced or incompetent managers, weak business models, and rogue unregulated operators. Hopefully, these highly publicized events will put renewed focus on implementing domestic regulation that has been stalled for years.”
Jennifer Schulp, the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, contended that regulations should not inhibit market forces in the cryptocurrency space. “While circumspection around a novel class of asset and technology is more than fair, it is entirely different from actively preventing individuals from accessing an instrument that approximately one in five Americans by some measures already have chosen to use for diverse purposes, from trading to sending remittances,” she said.
American University law professor Hillary Allen warned that any regulation on cryptocurrencies should not encourage a closer link between digital assets and the banking system. Crime show actor Ben McKenzie Schenkkan, a vocal critic of cryptocurrencies, also testified before lawmakers, asserting that the tokens are a “poor medium of exchange, unit of account, and store of value.”
O’Leary, known for his intense skepticism of pitches presented to “Shark Tank,” lamented during a recent interview that he fell victim to “groupthink.” The former software entrepreneur had repeatedly lauded FTX on his social media platforms and openly expressed confidence in the company’s legitimacy. Bankman-Fried solicited multiple cultural icons, including Tampa Bay Buccaneers quarterback Tom Brady and his supermodel ex-wife Gisele Bündchen, to work as brand ambassadors; many of the influencers are now the subject of a lawsuit claiming that they participated in a “fraudulent scheme” meant to fool unsophisticated investors.
Bankman-Fried was arrested on Monday afternoon by authorities in the Bahamas, where his companies were headquartered, under the expectation that American officials will request his extradition. The Securities and Exchange Commission has now officially accused the entrepreneur of money laundering and fraudulent behavior. A complaint from the agency alleges that he used commingled funds to make “undisclosed venture investments, lavish real estate purchases, and large political donations.”