Binance could face criminal charges, according to Kevin O’Leary.

Kevin O’Leary has commented on the 136-page charging document that the Securities and Exchange Commission issued against Binance on June 5th. He stated that the allegations were “serious” and believes that the founder and CEO of Binance, Changpeng Zhao, is in a difficult position. O’Leary was previously an investor in FTX, a crypto exchange that collapsed in November, resulting in him losing $15 million. Some attribute the failure of FTX to an exchange on Twitter between its CEO and Binance’s CEO, who briefly suggested he was open to bailing the company out, but later ruled out the possibility. Despite this, O’Leary expressed sympathy for Zhao, who has been targeted by the SEC for mishandling customer funds by transferring them between entities he controlled, including over $20 billion between Binance and Merit Peak. When asked about the impact of the lawsuit on investors, O’Leary stated that it would scare institutional money away from the crypto market. He believes that regulators, legislators, and lawmakers are tired of the rogue nature of the space and want to move on. The allegations against Binance are 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 other entities. O’Leary believes that if any of the allegations are true, it is an extremely difficult situation for Binance.

Moreover, they are targeting CZ personally, which is a difficult situation. One can’t help but feel some compassion for him. He is the founder of the world’s largest exchange. However, I believe that he will soon run out of options as to which jurisdictions will allow him to operate now that the number one regulator on Earth has made these allegations and filed these charges. This is not a good situation. There is no good news here. I don’t know how anyone can 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 for securities. To that end, it alleged that some big cryptocurrencies are securities, such as Cardano’s ADA, Solana’s SOL and Algorand’s ALGO. How do you feel about that and the future of anything other than Bitcoin and Ether? Would you invest in them at this point?

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KO: Yes. It doesn’t change my investment thesis about crypto. In fact, this encourages me that we’ll get to an endpoint sooner in terms of getting regulation and getting the infrastructure to integrate it with the world’s financial services. I find this a very encouraging development because we’ve really got to turn the page. I’ve said it multiple times. But I’m an investor in Polygon. I’m an investor in Mysten [Labs] and [its token] Sui. I’m an investor in Bitcoin and Ethereum and many others.

I think the promise of modifying financial services is very intriguing and has great potential. I’m an investor in Circle and a user of it. These are all good advancements. What’s holding us back are the rogue operators and all of these allegations of lack of transparency. […] These charges, to be honest with you — this is getting boring. I mean, it’s just getting boring.

I’m tired of it. I think most institutional investors are tired of it. It’s just boring, and I’d like to see something else now. And so, if we have to sacrifice a few pioneers, who cares? I mean, it’s not like they didn’t see this coming. I mean, it’s obvious what’s happening here. And I think, at this point, let’s move on.

CT: Do you see any daylight between the SEC’s case against Coinbase and its case against Binance?

KO: The charges are different. Coinbase has a different situation. It’s a public company. Its market cap was decimated [by the SEC suit], and the management there seems to want to keep taking on the SEC over and over and over again.

I would think at this point, if you’re a shareholder in that company, you may want to make some changes. I don’t think this is working as a strategy. […] I am not optimistic for the management team there.

I think the winds of change are gonna blow through that boardroom, and probably that’s a good thing. I think investors are done with this. There comes a point where you just have to realize you’re banging your head against a brick wall and you’ve got to resolve your issues with your regulator. You can’t keep doing this over and over and over again. The definition of madness is doing the same thing over and over and over again and expecting a different outcome. At this point, I think it’s over for them too.

I think we should thank the founders of that company. They were pioneers, but they clearly don’t have the maturity or skill set to operate in a regulated environment. […] I think at this point, they’re gonna have to work something out.

CT: Do you think there’s room after this for FTX to make a return to polite society, or to come out looking more ‘normal’?

KO: Well, the narrative on FTX is that it’s in the recovery phase. Allegedly, there’s $7.2 billion of the $8 billion [that’s] been found. That’s very encouraging. And so I would think we would want to go through the process of distributing that to the shareholders and the account holders and everything else.

KO: I think, you know, the question of the allegations of that the comingling of the equity that was brought up in the Senate hearings … the speculation — and I’m one of the people that speculated it — did Binance intentionally bankrupt FTX by stripping their balance sheet of $2 billion in U.S. cash and 580 million in FTT tokens to put their competitor out of business so they could be the global monopoly? That’s one scenario. Who knows if it’s true? But I guess in impressing these charges and going into discovery, we’re gonna learn a lot.

Although it’s in the past, we need to consider that this situation will continue and the financial aspect will be affected. However, this is not the future. The future looks promising. I intend to invest in regulated exchanges around the world because all these accounts will need to go somewhere, and they will want to be in a place where they can exist without constant threats from regulators.

Currently, I have invested in WonderFi in Canada, specifically Bitbuy. I am also exploring investment opportunities in Abu Dhabi and London. There are many regulated exchanges that have not had the opportunity to make profits because they were being overshadowed by unregulated global giants which had no rules, regulation, or cost of compliance. This is changing now, and I find it interesting. I believe that in the next 24 months, the value of these exchanges will increase.

This interview has been edited for brevity and clarity.