Author | Tom Maloney & Yueqi Yang & Ben Bartenstein, compiled by | Gu Yu, Chain Catcher
Every year, the Abu Dhabi Grand Prix attracts princes, movie stars and world-famous athletes to party on Yas Island, an entertainment hub about 30 minutes from the city centre.
Last month, a figure joined them in depicting an unlikely promotion: a former McDonald's clerk and software developer who jumped almost overnight to the ranks of the world's richest man — cryptocurrency pioneer Zhao Changpeng.
Zhao Changpeng is quickly becoming a regular visitor to the United Arab Emirates, where he meets royals in Abu Dhabi who are eager to bring his Binance trading platform to the country, according to people familiar with the matter. He bought an apartment in Dubai and hosted dinners near the burj Khalifa, the world's tallest building, and the city's Palm Jumeirah — making him the most prominent figure in the country's booming cryptocurrency space.
Zhao Changpeng Photo by Ore Huiying/The New York Times/Redux
In a region known for its dazzling wealth, Mr. Zhao, 44, fits well: According to the Bloomberg Billionaires Index, his net worth is $96 billion. This is the first time Bloomberg has estimated his wealth, surpassing Thatkoshi Ambani, Asia's richest man, and tech giants including Zuckerberg and Google founders Larry Page and Sergey Brin.
Zhao Changpeng's actual wealth may be much larger, because the wealth estimate does not take into account his personal crypto assets, which include Bitcoin and his company's own Token. The so-called BNB surged by about 1,300% last year.
Binance's success highlights the enormous wealth created in the untethered world of cryptocurrencies, and even though it has declined recently, the controversy has been swirling around the company.
The company was expelled from its birthplace, China, and faces investigations by regulators around the world. According to people familiar with the matter, the U.S. Department of Justice and the IRS are investigating whether Binance Holdings Ltd., an entity controlled by Zhao Changpeng, is a channel for money laundering and tax evasion. A spokesman for the U.S. Department of Justice and the IRS declined to comment.
Binance's future could depend on whether it can settle with world regulators and find a popular location to set up its headquarters.
For now, though, money is pouring in.
According to Bloomberg's analysis of its trading volume and fees, Binance generated at least $20 billion in revenue last year. That's almost three times the 2021 revenue of the publicly traded company Coinbase.
DA Davidson & Co. Analyst Chris Brendler said: "From a U.S. perspective, Coinbase may look like an gorilla weighing 800 pounds, but Binance is much larger."
Crypto giant
Binance is by far the most traded cryptocurrency trading platform on the spot and derivatives markets.
Mr. Zhao declined to comment on the matter, and Binance questioned the accuracy of Bloomberg's estimates of the company's market capitalization and its net worth.
"Cryptocurrencies are still in the growth phase," Binance said in a statement. "It is susceptible to higher levels of volatility. Any number you hear in one day will be different from the number you hear the next day."
A month before watching F1 stars Lewis Hamilton and Max Verstappen battle the yas marina circuit, Mr. Zhao spoke at the Bloomberg New Economy Forum in Singapore, where the numbers behind the rapid rise of the company he founded in 2017 poured out.
In the last 24 hours, Binance completed $170 billion in transactions. On a very slow day, he said, it was about $40 billion — compared to $10 billion two years ago.
In the crypto world, these are huge numbers. Binance usually promotes as much trading volume as the other four trading platforms combined.
When Bloomberg's Erik Schatzker asked the billionaire about his fortune in an Interview in Singapore in November, Zhao objected. "I don't care about wealth, money, rankings," he said.
The slim cryptocurrency entrepreneur, wearing rimless glasses and wearing a slightly larger striped tie, added that such a thing would be distracting and he was ready to donate almost all his fortune before he died.
Whether Zhao Changpeng can stick to his gains remains to be seen, and he has every reason to worry about the unbridled growth of his company.
In addition to the Justice Department and IRS investigations, binance is investigating possible market manipulation and insider trading by Binance, as well as whether illegal U.S. clients are allowed to trade cryptocurrency derivatives, according to insiders. The U.S. Commodity Futures Trading Commission declined to comment.
Binance has also been the subject of consumer warnings in countries such as the UK, Japan and Germany. On December 30, a Canadian securities regulator denounced the company for telling users of its trading platform that it could continue to do business in the country without registration.
A Binance spokesperson said the company "is working with regulators around the world and we take our compliance obligations very seriously."
Mr. Zhao said he welcomed — and hoped — regulation.
"I'm not a regulationist," he said at bloomberg. "I don't believe that human civilization has developed enough to live in a world without rules."
Wealth based on cryptocurrencies has surged with the value of digital tokens, totaling $2.09 trillion on Jan. 7, up from $135 billion three years ago.
Until recently, cryptocurrency entrepreneurs rarely appeared in global wealth rankings. As more and more industry companies take advantage of venture capital financing or the open market to make the value of these businesses more transparent, more and more companies are entering the ranks.
Trading platforms such as Coinbase, Gemini, FTX, and Kraken have garnered huge valuations in both the public and private markets, and Binance's popularity among users and numerous products may be more attractive to investors.
However, the fate of cryptocurrencies is volatile. Bitcoin has fallen more than 8% this year to about $42,400, well below the high of nearly $69,000 in early November. Coinbase's share price has fallen about 35% in the past two months.
Some businesses have clashed with regulators. BitMex is a cautionary tale that was once the world's largest cryptocurrency derivatives trading platform.
In August, BitMex paid $100 million to settle with the CFTC and financial crimes enforcement networks over allegations that it allowed illegal derivatives trading and violations of anti-money laundering laws. The company did not admit or deny the allegations. Founders Arthur Hayes, Samuel Reed and Ben Delo are awaiting trial after pleading not guilty in another Justice Department case alleging them for violating bank secrecy laws.
Crypto Wealth
Changpeng Zhao is the richest cryptocurrency entrepreneur tracked by the Bloomberg Billionaires Index.
The Bloomberg Billionaires Index estimates Binance's revenue for 2021 based on dollar-denominated spot and derivatives trading volumes published by industry research institutes Coingecko and Nonomy, as well as transaction fees in public. This calculation excludes the company's other sources of income, such as margin loans, technology, consulting and NFTs. Its valuation uses multiples of the corporate value of its listed peers to sales. Based on his public statements and regulatory documents in jurisdictions requiring the disclosure of the information, it assumes that Mr. Zhao owns a 90 percent stake in the company.
Zhao told Bloomberg in an Interview in November that Binance's revenue is achieved through hundreds of crypto tokens, which the company does not convert to traditional currencies.
"We just grab them," he said. "If you count today's number, it's a number, and in 5 minutes it's a different number because every price is changing."
Zhao Changpeng was born in Jiangsu Province, China, and is currently a Canadian citizen. His father, a university professor, moved his family to Vancouver at the age of 12.
Mr. Zhao was exposed to technology as a young man, later studied computer science, and eventually found financial jobs in Tokyo and New York, including four years at Bloomberg LP, the parent company of Bloomberg News.
His crypto journey to riches began in 2013 with a friendly poker game in Shanghai with then-BTC China CEO Bobby Lee and investor Ron Cao, who both encouraged him to put 10% of his net worth into Bitcoin.
After spending some time researching, he ventured and eventually sold his apartment for bitcoin. In 2017, he founded Binance and quickly grew into a cryptocurrency powerhouse. Zhao Changpeng even tattooed the company's logo on his arm.
Binance has become a top destination for trading "altcoins" – cryptocurrencies that are less liquid than more mature tokens like Bitcoin and Ethereum and have become some of the most speculative corners of the market. According to Coingecko, the company offers more than 350 tokens on its international trading platform, more than double the volume offered by Coinbase.
Tim Swanson, head of market intelligence at London-based blockchain company Clearmatics, said Binance had succeeded in creating "user stickiness," in part by allowing customers to use BNB to reduce transaction fees.
Swanson said of Binance, "They don't even have to be the first people to go public with a token, liquidity can be gathered there."
Zhao's company is also the most traded derivatives trading provider, allowing users to speculate on cryptocurrencies with greater risk and potential rewards.
Initially, Binance allowed clients to open an account using only their email address. It focuses on cryptocurrency trading, limiting interaction with traditional banks and their regulators. In August, the company announced that all new users would have to verify their identities, while existing users who did not verify their identities would be restricted from withdrawing.
It has never had a formal headquarters. Founded in China, Binance has since traveled to Japan and Malta, where financial regulators later denied oversight of the trading platform. Although the company has significant operations in Singapore, its local unit suffered setbacks last month when it withdrew its application to operate a trading platform in Singapore.
Zhao said in an interview in November that Binance is now trying to identify a location, adding that the announcement about the headquarters will be released "in a very short time".
It was a turning point in 2020, when Mr. Zhao said the company's headquarters was somewhere he happened to be. In legal documents, the firm's lawyers said it was incorporated in the Cayman Islands, known as an offshore tax and regulatory haven.
Binance's ability to operate from almost anywhere makes it difficult for regulators to establish jurisdiction over the company.
"Their approach is, 'We don't need regulators, we're decentralized,'" said Da Davidson analyst Brendler. "This is very effective for growth and expansion and product innovation."
As Binance seeks to raise capital from outside investors, Zhao's freewheeling approach may need to change, and these outside investors often require some level of oversight to ensure the business is legally sound. According to people familiar with his discussions in the UAE, Mr. Zhao is being driven to find a supportive regulatory regime.
Binance has been held by former employees of UAE regulators and has signed an agreement with dubai world trade centre authorities to help develop a regulatory framework for crypto.
Not all of Binance's efforts to curry favor with regulators are going well.
Last year, trading platform-related separately managed trading business Binance.US hired a former acting auditor general of U.S. currencies as CEO. His appointment was seen as a positive step toward resolving regulatory issues, but he lasted only three months, leaving in August after disagreements over strategic directions.
Despite the legal challenges, investors may want to take a risk in the world's most successful cryptocurrency trading platform. Late last year, Binance was looking to raise money from sovereign wealth funds, and its U.S. subsidiary was also looking for investors with an initial public offering. In November, the Wall Street Journal reported that former executives estimated the company's value could be as high as $300 billion.
This will make Zhao Changpeng Zhao richer than musk, the world's richest man at present, and Bezos, who Zhao Changpeng "admires".
"I don't know him personally," Mr. Zhao said of Amazon's founder at a Bloomberg event in November. "But I would love to connect with him in the future."
[This article was originally published in ChainDede, authorized by Titanium Media App, author: Chain Catcher]