• Sunday, May 26, 2024
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The boom and bust of Changpeng Zhao, ex-Binance CEO

The boom and bust of Changpeng Zhao, ex-Binance CEO

Changpeng Zhao, the founder of Binance, the world’s largest crypto exchange, has gone from being one of the top players in the cryptocurrency ecosystem to jail like his counterpart Sam Bankman-Fried, founder of FTX.

According to the Bloomberg Billionaires Index, he is the 38th richest person in the world, with a net worth of $39.7 billion.

Zhao, popularly known as CZ, is a Chinese Canadian who relocated to Vancouver with his family in the 1980s, according to a Maclean report. He took on some part-time jobs, from working at McDonald’s at 14 to working at a Chevron gas station. He also studied computer science at McGill University in Montreal, the same school where his father worked as a visiting scholar.

A $14,000, 286 DOS computer that his father bought when CZ was in his teens fueled Zhao’s interest in technology. Before attending McGill, CZ enrolled in programming classes in high school and started coding when he was just 16 years old, according to a Bloomberg report.

After graduating from university, CZ had a successful career working on the Tokyo Exchange and Bloomberg’s Tradebook, per Forbes. Having quit corporate life in 2005, he moved to Shanghai to become a partner at the trading system company Fusion Systems. According to CZ, he left the company in December 2013.

Valued at over $100 billion, Zhao founded Binance in 2017 and grew to the largest cryptocurrency exchange by trading volume. According to the Protocol, the exchange handles about $76 billion daily trading volume.

CZ operated the world’s largest crypto exchange with 150 million customers while facing regulatory issues in many countries. He also pretended to block access to US customers while quietly allowing these US customers to buy and sell trillions of dollars’ worth of assets, profiting $1.6 billion from them, according to a report from Protos.

He defied regulators in the United Kingdom, Netherlands, Germany, Malta, Ireland, Australia, Italy, Thailand, Poland, the Cayman Islands, Singapore, Hong Kong, Ontario, China, and countless others. And despite his exchange receiving countless orders to cease operating in various jurisdictions, he persisted.

In October 2023, Binance had a run-in with the UK’s financial regulator, the Financial Conduct Authority (FCA). After changing its crypto promotion rules, the FCA required crypto firms to be registered with it to approve marketing campaigns. It also left the door open for approval by an authorised third party.

Binance was forced to leave the Netherlands after its application to register under the Dutch crypto authorisation regime was rejected.

Sometime in March 2024, the Commodity Futures and Trading Commission (CFTC) sued Zhao, Binance, and its former chief compliance officer, Samuel Lim, for allegedly violating trading rules.

It claimed a “willful evasion of federal law” because Binance ignored requirements to register the exchange and helped customers evade its “ineffective compliance program.”

The CFTC said Binance didn’t require customers to provide ID and “failed to implement basic compliance procedures designed to prevent and detect terrorist financing and money laundering.”

It claimed that the crypto platform allowed more than 1.5 million virtual currency trades, totalling nearly $900 million, that violated U.S. sanctions, including ones involving Hamas’ al-Qassam Brigades, al-Qaeda, and Iran.

Binance will pay a $4.3 billion fine, and CZ will pay a $50 million fine as part of his plea deal with prosecutors. Part of the fine will go toward settling the lawsuit brought by the CFTC.

CZ was sentenced to four months in prison on Tuesday (April 30, 2024) after pleading guilty to charges of enabling money laundering at his crypto exchange.

The former Binance boss was sentenced to less than the three years that federal prosecutors had asked for. According to industry experts, CZ seems to have gotten off with a pat on his back compared to former crypto rival Sam Bankman-Fried, the founder and ex-CEO of FTX.

Bankman-Fried was recently sentenced to 25 years in prison for crimes connected to the operation of FTX.