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Changpeng Zhao had long cultivated the image of the rugged pugilist of the cryptocurrencies world.<\/p>\n
When his rival Sam Bankman-Fried\u2019s crypto empire collapsed a year ago, Zhao, or \u201cCZ\u201d as his fans call him, was in the middle of it all, yanking his money in a very public way and helping trigger the ultimately fatal run on the firms. Years earlier he claimed the company\u2019s headquarters was wherever he happened to be, a thinly veiled salvo against regulators trying to nail down jurisdiction. And this March, when US regulators charged Zhao and his firm, Binance Holdings, with violating US securities laws, his on-line response was \u201c4,\u201d which is Zhao code for dismissing something as unworthy of his attention.<\/p>\n
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Changpeng Zhao with his Binance tattoo in Paris.<\/span>Credit: <\/span>Bloomberg<\/cite><\/p>\n On Tuesday, though, Zhao cut a very different image in a Seattle courtroom. Dressed in dark suit and pale blue tie before a federal judge, he pleaded guilty to criminal charges for anti-money laundering and US sanctions violations, including allowing transactions with Hamas and other terrorist groups, under a sweeping deal with the Justice department designed to keep the biggest crypto exchange operating. Binance itself agreed to plead guilty to criminal charges and pay over $US4 billion ($6.1 billion) in penalties. Zhao stepped down as CEO and will pay a $US50 million fine.<\/p>\n Zhao\u2019s capitulation in many ways is the culmination of a multi-year dragnet by international regulators who sought to rein in and impose regulations on Binance – and, by extension, the broader industry.<\/p>\n Moreover, it marks the second time in less than a year that the crypto universe, still reeling from a crash that shaved some $US2 trillion off the value of the market, loses one of its biggest stars. Bankman-Fried may have been the best known name in crypto but Zhao, worth almost $US100 billion ($153 billion) at his zenith in early 2022, was the wealthiest and most powerful.<\/p>\n \u201cThis is a big deal,\u201d said Michael Rosen, chief investment officer at Angeles Investments. Zhao\u2019s \u201cprominence helped him until it hurt him,\u201d converting him eventually into a big target for authorities.<\/p>\n Richard Teng, a civil servant-turned-crypto executive, succeeded Zhao.<\/p>\n Binance Coin, a cryptocurrency also known as BNB that is the main transactional token on the exchange, dropped more than 8 per cent on Tuesday.<\/p>\n Zhao played a key role in bringing cryptocurrencies into the mainstream. He built Binance into a juggernaut that at one point controlled almost two-thirds of spot trading over centralised exchanges – attracting scrutiny from regulators and law enforcement agencies around the world along the way.<\/p>\n The departure of crypto\u2019s perhaps most iconic remaining executive comes as the industry tries to put its reputation for scandals, scams and other illicit activities behind it. Several entrepreneurs associated with that era, from Bankman-Fried to Do Kwon and Alex Mashinsky, are either in jail or have been charged with alleged crimes that led to multibillion-dollar losses.<\/p>\n Zhao faces as many as 10 years in prison but is expected to get no more than 18 months under a plea deal that appears to have saved him from the harsh penalties that other prominent crypto criminals have faced. The Justice Department hasn\u2019t decided yet what length of a prison term they will seek for him.<\/p>\n \u201cI will have to deal with some pain, but will survive,\u201d Zhao said in an internal announcement. \u201cI needed a break anyway.\u201d He also provided a glimpse of what\u2019s in store for Binance: \u201cWe will get through, although with some changes in structure.\u201d<\/p>\n Born in China, Zhao moved to Vancouver when he was 12 and became a Canadian citizen. With a computer science degree from McGill University, he began a career building trading systems, including a stint at Bloomberg LP, the parent company of Bloomberg News.<\/p>\n Zhao played a key role in bringing cryptocurrencies into the mainstream.<\/span>Credit: <\/span>Getty<\/cite><\/p>\n In 2013, Zhao was running his own software company in Shanghai when he discovered Bitcoin over a poker game. After working at crypto firms Blockchain.info and OKCoin, he started Binance in 2017 together with chief marketing officer Yi He, with whom he has children.<\/p>\n Binance quickly embarked on an acquisition spree that saw it morph into a brokerage, digital wallet, venture fund, custody service, data provider, digital-art marketplace and token issuer – all under Zhao\u2019s direct control.<\/p>\n Within just a few years, Zhao was the richest person in crypto. Favouring a buzz cut and black polo shirts featuring Binance\u2019s logo, he became a fixture on the crypto conference circuit, spending 580 hours on airplanes in 2022 by his own estimate.<\/p>\n The lack of separation between business actives such as custodial and trading services common among crypto exchanges, unlike in traditional finance – has stirred concerns that giant crypto exchanges like Binance could pose systemic risks.<\/p>\n When Bankman-Fried\u2019s FTX imploded in November 2022, billions of dollars of client funds were trapped because FTX had lent assets to the hedge fund he also controlled, Alameda Research, which had made huge losing bets. Zhao himself helped hasten FTX\u2019s demise with a post on Twitter about selling Binance\u2019s holding of its native token FTT, which touched off a stampede to withdraw money from FTX.<\/p>\n \u201cI will have to deal with some pain, but will survive. I needed a break anyway.\u201d<\/p>\n Bankman-Fried was convicted of a massive fraud in early November and is awaiting sentencing. He faces the possibility of decades in prison.<\/p>\n Binance and other exchanges have argued that they present no similar risks because all of their client assets are kept separated and thus available for withdrawal at any time. Zhao himself regularly uses the term \u201cSAFU\u201d in tweets to assure customers that their funds are safe.<\/p>\n In the third quarter, the exchange has accounted for about 38 per cent of all trading volumes across the spot market, down from nearly 55 per cent in the first quarter of the year, according to researcher CCData. By comparison, Coinbase, the biggest US crypto exchange, had a 5.7 per cent market share in the quarter.<\/p>\n While Zhao publicly displayed defiance amid the charges, Binance authorities were working with regulators behind the scenes. Even Zhao\u2019s official statement back in March was a bit more conciliatory than his \u201c4\u201d tweet, saying the firm was looking for \u201camicable solutions.\u201d<\/p>\n The 4 tweet quickly became a favourite of his on-line detractors Tuesday. It actually represented, they snickered, the $US4 billion fine Binance would pay.<\/p>\n<\/p>\n