"The hottest deal on the street": When Shark Tank's Kevin O'Leary talked about the failed crypto exchange

Shark Tank investor Kevin O'Leary highlighted in an interview on The Daily Show on March 3, 2023, that FTX was one of the most sought-after investment opportunities in the market, attracting top venture capital firms and investors in 2021. He stated,

"So, obviously, at a time in 2021 when FTX was out financing, doing rounds at a $23 billion valuation, that was the hottest deal on the street."

With this statement, O'Leary underscored the widespread enthusiasm surrounding FTX at the time and the confidence major investors had in the company's potential. However, the collapse of FTX has since reshaped discussions around due diligence, risk assessment, and accountability in the venture capital space.

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Shark Tank Kevin O’Leary on FTX: Insights from the collapse

O’Leary’s perspective on venture capital and risk

O’Leary underscored that losses in startup investments are common and should be expected. The Shark Tank investor stated,

“At the end of the day, when you invest in any startup—this includes FTX and plenty of others—8 out of 10 times, you lose your money since 1954 when they started compiling these stats.”

This statement aligns with his broader investment philosophy, which acknowledges that while many startups fail, the few successful ones generate significant returns. He also addressed concerns about whether the FTX collapse would alter the investment landscape. O’Leary explained,

“The people that invested in FTX, people are asking me, well, isn’t this going to change investing forever? No, nothing’s going to change.”

He maintained that despite occasional high-profile failures, the overall approach to venture capital remains unchanged because investors seek opportunities with high potential returns. Additionally, he described his reaction to losing his investment,

“The next morning, after I lost that $18 million, yes, I was pissed, OK? But it didn’t change anything about what I do as an investor. I get right up, and I go at it again.”

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Due diligence and the unexpected outcome

O’Leary highlighted that many major investors were involved in FTX, which contributed to its credibility at the time. The Shark Tank investor noted,

“If you look at the people that invested in that, it’s the who’s who of venture capital.”

By referencing the presence of well-established firms and individuals, he suggested that FTX’s appeal was not limited to retail investors but also attracted experienced financial professionals. When discussing the due diligence process, O’Leary remarked,

“We know that it’s got the biggest investor list I’ve ever seen. And the parents were compliance lawyers out of Stanford. I mean, that’s pretty good.”

This statement underscored that multiple factors contributed to the belief that FTX was a legitimate and well-structured company. Despite these considerations, he acknowledged the broader failure in identifying issues within FTX’s operations. The Shark Tank investor stated,

“I owe everybody and all of us involved an apology for not knowing it was an alleged fraud.”

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The aftermath and market response

O’Leary emphasized that financial markets have experienced similar events in the past and that the system eventually self-corrects. He remarked,

“Did Lehman Brothers change anything? No. Enron? No. Bear Stearns? No. Long-term capital? No.”

The Shark Tank investor compared the FTX collapse to other financial scandals, arguing that while they are significant, they do not fundamentally alter the broader financial system. Regarding potential recovery efforts, he noted,

“Already, the rumors are where it’s 6 out of 8 billion. They found that, 6.1 billion. Who knows what else will be coming?”

This statement referenced reports that some of the lost funds might be recovered, though the outcome remained uncertain. Finally, O’Leary reiterated his focus on continuing to invest in new opportunities. He stated,

“We have to fund the next venture. We have to fund the next entrepreneur.”

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