Binance CEO says FTX was ridded with red flags

The thread starts off by focusing on investor Kevin O'Leary's losses of $15 million thanks to the now-collapsed project.

"It seems $15m not only changed [Kevin O'Leary]'s mind about crypto, it also made him align with a fraudster. Is he seriously defending SBF?" the thread began, before revealing that Binance left FTX a year and a half ago in July 2021.

"On top of that, FTX spent money on Miami Stadium, multiple Super Bowl ads, baseball referees, F1, not to mention massive political donations and luxury real-estate. Oh, and reprehensible misuse of customer funds.

"Worse than losing $15M, you’d think that being used as the poster child for one of the greatest financial crimes in history would make @kevinolearytv think twice before taking Sam at his word AGAIN. But clearly not, based on his appearance on.

Zhao said that Binance does its due diligence "even after we make an investment," accusing O'Leary of not doing the same.

"As an early investor in FTX, we became increasingly uncomfortable with Alameda/SBF and initiated the exit process more than 1.5 years ago," the thread continues.

"Sam was so unhinged when we decided to pull out as an investor that he launched a series of offensive tirades at multiple Binance team members, including threatening to go to 'extraordinary lengths to make us pay' – we still have those text messages."

Zhao claims that after Bankman-Fried started "investing" in "friends" such as media and policymakers, he used that network to "manipulate public opinion, including attacking me and others in the industry."

Those attacks, Zhao says, included racial attacks: "My ethnicity was a focus of those attacks and

@kevinolearytv signaled his intention to continue those attacks in the media and will likely repeat them at next week’s Senate hearing. I’m Canadian and Binance is not a Chinese company."

"You don't have to be a genius to know something don't smell right at FTX. They were 1/10th our size, yet outspent us 100/1 on marketing & 'partnerships', fancy parties in the Bahamas, trips across the globe, and mansions for all of their senior staff (and his parents)," the thread continues.

Zhao concludes the thread by saying that O'Leary should blame Bankman-Fried and himself for the implosion of FTX: "If @kevinolearytv is looking for someone to blame for the implosion of FTX, he should start by wagging his finger at his investment partner, Sam, and then perhaps at the man in the mirror."

It was after Coindesk published an article raising concerns about the value of FTX's proprietary crypto coin FTT that Zhao began to take a closer look at Binance's FTT holdings. Zhao then announced, on November 6, that they would be selling off their FTT assets. FTX then faced a cash crunch, found themselves in need of a bailout, and sought help from other crypto exchanges.

"FTT had already lost 80% of its value between Monday and Tuesday, falling to $5 and wiping out more than $2 billion in a day. It dropped by more than half on Wednesday to around $2.30, shrinking the total value of circulating tokens to roughly $308 million," CNBC reported.

Zhao said Binance would take a look at a bailout, but when Zhao took a look at the due diligence, he backed off right away. It was at that point that customers made a run on FTX, trying to get their money out, and it was revealed that FTX did not have their money.

Zhao said at the time:

"As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.

"In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.

"Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.

"As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger."

By that Friday, customers were out of luck, FTT was tanking, and investors and funds that had invested in FTX were out billions. The Ontario Teachers Pension, for example, lost $95 million.