Changpeng Zhao became the richest person in the cryptocurrency world while avoiding compliance systems and sanctions laws. His guilty plea to money laundering charges is unlikely to change that – at least for now.
Introduction
On his way to the top of the cryptocurrency world, Changpeng Zhao pretended as if he didn’t care about his wealth. “I don’t really know what my net worth is. I’m not too interested in it,” he told Forbes in the summer of 2021.
Changpeng Zhao’s Guilty Plea
On Tuesday, U.S. prosecutors painted a different picture of the Binance CEO. Zhao, known as CZ, pleaded guilty to federal money laundering charges, admitting to sidestepping U.S. regulations and avoiding sanctions laws in his quest to dominate the cryptocurrency market, which in turn increased his fortune.
Impact of the Guilty Plea
Forbes estimates Zhao’s fortune, which is 90% tied up in Binance and constitutes the majority of his wealth, to be worth about $15 billion. This is up from $10.5 billion in April, when Forbes released its list of the world’s billionaires for 2023. Forbes estimates that Binance has generated over $3 billion in revenue over the past 12 months, based on trading volume analysis in cryptocurrencies (according to CoinGecko), while also considering alleged wash trading or bogus transactions that Binance is accused of, which create the appearance of more customer activity than actually exists. (Binance has denied this.)
Future Challenges for Binance
Despite favorable winds in the cryptocurrency world, Binance faces a unique reality where an independent compliance monitor will oversee its activities for three years and report to the U.S. government. These constraints may hamper Binance’s revenues and threaten its position as the largest global cryptocurrency exchange.
Future of Changpeng Zhao
Binance’s ability to maintain its market share in cryptocurrency trading will determine the fate of Changpeng Zhao’s wealth. According to a report from CCData, Binance facilitated 32% of spot cryptocurrency trades and 50% of derivative trades in October, despite its market share in spot cryptocurrencies declining for eight consecutive months.
Effect of Guilty Plea on Binance
On the other hand, the guilty plea agreement reached on Tuesday could help Binance by lifting the cloud that had been hanging over its head, according to Owen Lau, a cryptocurrency and financial exchange analyst at Oppenheimer & Co. “People who were worried about the prosecutors [of Binance] have already left. Today’s announcement gives them some comfort that they can return,” Lau said on Tuesday. “For me, this could have a somewhat positive impact on Binance. The major downside didn’t happen – Binance didn’t become a dead business. It is still operating.”
Future of Binance
Richard Teng, the new CEO of Binance, insists that the company is poised for growth moving forward. “The fundamentals of our business are very strong,” he said in a tweet.
Impact of the Guilty Plea on Binance
Since the announcement of the guilty plea agreement, Binance has seen a net inflow of around $956 million into Ethereum, although its total cryptocurrency volume still remains above $65 billion, according to tracking site Nansen. “As of the writing of this article, withdrawals are still ongoing, and we haven’t seen a mass exodus of funds,” Nansen wrote in a tweet this morning.
Future of Changpeng Zhao
Binance was founded in 2017 by Changpeng Zhao, who has a background in programming, after raising $15 million. From its early days, Binance was favored among cryptocurrency traders and developers for its execution speed and new products. Zhao’s risk tolerance and bold approach contributed to the company’s growth but also placed Binance on the radar of financial authorities and regulators. “Wherever I sit, it will be the Binance office,” he told Coindesk in 2020.
Challenges
Binance’s Past
China, Singapore, and Malta served as transit points for Zhao and a small group of loyal assistants until regulatory pressures forced them to remain in constant motion. Binance attempted to establish a European headquarters in London, but was rejected by regulatory bodies and accused of fraud by partners. Ultimately, Zhao moved to the United Arab Emirates, where he has been living in Dubai since 2021.
Zhao’s Lifestyle
The company’s growth has contributed to a luxurious lifestyle for Zhao. He utilized offshore entities controlled by his long-term deputy Hina Chen to purchase a private jet worth $55 million, spent $11 million on a yacht, distributed $62.5 million to one of his personal bank accounts, and funneled $178 million to two companies in Singapore controlled by Zhao and Chen, according to the Securities and Exchange Commission, which filed charges against Zhao and Binance in June. The commission alleged that Binance sold unregistered securities to U.S. customers. (Zhao and Binance deny the allegations and continue to contest the charges brought by the SEC, which differ from those reached this week).
The Future of Changpeng Zhao
Forbes’ estimate of Zhao’s wealth at $15 billion does not include a personal investment portfolio. However, he could have a portfolio worth several billion dollars, depending on how much of Binance’s earnings he has retained for himself over the years. He previously told Forbes that he owns about 1,400 bitcoins – currently valued at around $36 million.
The Future of Changpeng Zhao
According to the plea agreement, Changpeng Zhao may return to lead Binance after a period of triage imposed by independent compliance monitoring.
Changpeng Zhao’s Future Plans
Currently, Changpeng Zhao intends to “maybe make some passive investments” in cryptocurrency, artificial intelligence, and biotechnology, according to a tweet he posted on Tuesday. Zhao has previously told Forbes that he intends to donate between 90% and 99% of his wealth to charity. “We hope that happens soon,” Zhao said earlier. The charitable donation was not mentioned in his latest tweet.
Follow me on Twitter or LinkedIn. Send me a secure tip. John Hyatt
Edit Standards
Reprints and Permissions
Leave a Reply