Billionaire Leon Cooperman, chairman and CEO of Omega Advisors, blasted the creators of the volatility-related securities that imploded earlier this week.
"I'd implore ... the regulators and the financial services industry to deal with the crazy instruments that have been created that are destroying the best capital market in the world," he said Wednesday on CNBC's "Halftime Report."
The VelocityShares Daily Inverse VIX Short-Term, which trades under the ticker symbol XIV, declined 93 percent on Tuesday, a day after the CBOE volatility index, or VIX, surged by 115.6 percent. XIV is issued by Credit Suisse and is supposed to give the opposite return of the VIX. After the price collapse, Credit Suisse announced it is triggering the liquidation of the product.
Cooperman blamed the worries over the VIX-related products for causing the sell-off in the market earlier this week.
The decline was "just absolutely crazy. Nothing to do with economics," he said. "The economy is performing better. Earnings are performing better."
The investor said regulators and the industry must act to lower the leverage in these volatility-related products and increase the margin requirements for the securities.
"The S&P does not deserve to trade up or down 100 points in a half hour. It's crazy. It creates casino mentality," Cooperman said.
Cooperman founded Omega Advisors in 1991. The firm has approximately $3.8 billion in assets under management.
His firm agreed last year to a $4.9 million settlement with the Securities and Exchange Commission after allegations of insider trading. As part of the settlement, Omega Advisors admitted to no wrongdoing.