Thanks to Binance’s rapid expansion, CZ became one of the most influential figures in the cryptocurrency space, amassing over 8.5 million followers on Twitter (now rebranded as X.) He was also thought to be the wealthiest person in cryptocurrency, with a personal fortune estimated at over $95 billion at its peak.
Zhao was instrumental in the outstanding growth and early successes of Binance, but more recently, has also become embroiled in several legal controversies resulting in his downfall.
In 2023, Binance and Zhao personally faced a litany of charges from regulators, including the United States Securities and Exchange Commission (SEC). Matters culminated in November 2023 when the Department of Justice announced the largest-ever corporate penalty against Binance for breaking money-laundering laws. As part of the settlement, worth $4.3 billion, Zhao was forced to step down from his role at Binance and is facing jail time in the US.
Personal history
Changpeng Zhao was born in 1977 in Jiangsu province, China. At the age of 12 years, following the Tiananmen Square massacre, he moved with his family to Vancouver, Canada, going on to attend McGill University in Montreal, where he studied computer science. After graduating, he moved into roles as a trading software developer, working on a trade matching engine for the Tokyo Stock Exchange and a futures trading platform for Bloomberg Tradebook in New York.
In 2005, Zhao moved back to Shanghai to launch his own company, Fusion Systems, which developed software for automated high-frequency stock trading.
In 2013, he discovered Bitcoin and went all in, leaving the company and selling his flat in Shanghai to invest all of his money in crypto. He went on to hold roles at Blockchain.info, a wallet provider, and OKCoin, a Chinese cryptocurrency exchange, where he served as Chief Technology Officer.
Launch and expansion of Binance
In 2017, Zhao launched Binance with co-founder Yi He, who still serves as the company’s Chief Marketing Officer as of 2023. The company raised $15 million in an initial coin offering in 2017 and, within months, had established itself as one of the world’s largest cryptocurrency exchanges. The initial growth was driven partly by the 2017 bull market and Binance’s practice of listing as many available token pairs as possible.
During 2018 and 2019, the company pursued aggressive growth through acquisitions and expansion into new geographies and products. In 2018, Binance opened new offices in Malta and Jersey, acquired non-custodial wallet TrustWallet, and launched its Charity Foundation. In 2019, the firm began offering perpetual futures products with high leverage.
Binance launched BNB coin as an ERC-20 token for its ICO in 2017, which later became a utility token offering trading fee discounts on the exchange. In 2019, Binance launched its own blockchain, then called Binance Chain, for which BNB became the native token. The Binance Chain has undergone several technical updates but is now known as the BNB Chain.
In his role as Binance CEO, CZ has been involved in several notable controversies.
Involvement in FTX collapse
In 2019, Binance became one of the earliest investors in a then-fledgling cryptocurrency exchange called FTX. However, as the latter underwent a similar growth trajectory to Binance’s only a few years earlier, rivalry between the two firms began to heat up.
In November 2022, Coindesk published its investigation revealing substantial financial dependencies between FTX, its sibling trading firm Alameda Research, and the FTX exchange native token, FTT. Soon after publication, Zhao posted a series of tweets explaining that Binance had cashed out its investment in FTX the previous year. It also explained that a substantial part of the settlement was in FTT, and that outlined Binance’s plan to liquidate its FTT holdings.
Amid the subsequent solvency crisis, CZ and FTX CEO Sam Bankman-Fried took to Twitter to announce that Binance would acquire FTX. However, within a day, Zhao announced his firm was pulling out of the deal following a due diligence exercise and reports that FTX had mishandled customer funds. FTX went on to face bankruptcy, and Sam Bankman-Fried was later found guilty of multiple criminal fraud and conspiracy charges.
Regulatory breaches and DoJ charges
Since it began to pursue global expansion, Binance has received multiple reprimands for its failure to comply with regulations. In 2021, the UK Financial Conduct Authority issued a warning to consumers that Binance was not permitted to offer regulated financial services. Japanese regulators had issued similar warnings in 2018 and 2021.
However, Binance’s reputation and position as a leading global exchange has been damaged by ongoing regulatory and compliance failings in the US, resulting in multiple legal and criminal charges in 2023.
In March 2023, the Commodities and Futures Trading Commission announced it was filing an enforcement action against Zhao, another of Binance’s executives, and three Binance entities with trading violations. Three months later, in June, the Securities and Exchange Commission brought thirteen charges against Binance, including mishandling customer funds, misleading investors and regulators, and breaching securities laws.
In November 2023, the US Department of Justice revealed it had reached a settlement with Binance for breaking anti-money laundering laws following an investigation. The firm agreed to pay $4.3 billion in penalties, the largest corporate fine in US history. The DoJ allegations included a failure to report 100,000 transactions suspected to be associated with terrorist organizations, as well as facilitating transactions with sanctioned individuals and countries.
As part of the settlement, CZ agreed to pay a personal fine of $50 million and step down from his role as CEO of Binance. Furthermore, having pled guilty to charges of violating the Banking Secrecy Act, he also faces up to a decade of US jail time. In light of the ongoing case against CZ and the fact that the SEC charges remain outstanding as at the end of 2023, the situation continues to evolve.
Changpeng Zhao essentials
- Changpeng Zhao, also known as CZ, is a Chinese-Canadian entrepreneur and former head of Binance, a global cryptocurrency exchange business.
- During the period 2018 to 2022, Binance underwent significant growth and CZ became a prominent figure due to his wealth and influence.
- Since 2022, Binance and CZ have been embroiled in a string of legal issues resulting in criminal charges for violations of money laundering regulations. As a result, Binance has paid fines worth $4.3 billion, and CZ faces up to ten years of jail time in the United States.