Changpeng Zhao, founder and CEO of cryptocurrency exchange Binance, speaks at Binance’s fifth anniversary event on July 8, 2022 in Paris, France.
Staff | Reuters
Billionaire co-founder and former Binance CEO Changpeng Zhao expects his vast wealth to remain unchanged and may continue to climb, despite facing jail time following his sentencing in a Seattle court.
Zhao, commonly known as “CZ” in cryptocurrency circles, was sentenced to four months in prison on Tuesday after pleading guilty to charges of money laundering at his cryptocurrency exchange.
Zhao’s sentence in federal court in Seattle was significantly less than the three-year sentence federal prosecutors had sought. The defense asked for five months of probation. Sentencing guidelines call for a sentence of 12 to 18 months in prison.
In a statement to CNBC, a Binance spokesperson said the cryptocurrency exchange has “significantly enhanced compliance,” including anti-money laundering testing and “hiring key compliance personnel.”
Zhao’s attorney did not immediately respond to CNBC’s request for comment.
In November, Zhao reached a deal with the U.S. government to end a years-long investigation into Binance. As part of Binance’s $4.3 billion settlement with the U.S. Department of Justice, Zhao resigned as the company’s CEO, and the exchange agreed to form a board of directors composed of independent members, as well as compliance and audit committees.
Of the seven recently appointed directors Board of Directors since its inceptionthree were designated “independent,” and five of them, including all independent members of the board, submitted letters to the judge in Zhao’s criminal case asking for leniency in sentencing.
Gabriel Abed, the committee’s chairman and one of its independent members, told U.S. District Judge Richard Jones that Zhao was “known for his stoic calm and genuine humility” despite his achievements. A major achievement,” but he still maintains a simple lifestyle, including wearing clothes bought on Amazon, driving a Toyota and wearing an Apple Watch.
Although Zhao now faces jail time, industry experts and lawyers interviewed by CNBC said his vast personal wealth will not be affected and may even increase.
Los Angeles corporate lawyer Tre Lovell told CNBC the government is only entitled to any compensation or fines, not all of Zhao’s assets or wealth. Former federal prosecutor Neama Rahmani agreed, adding that Zhao’s personal wealth would not be affected by the verdict.
“Because of the agreement between Zhao and the government, the government did not obtain a judgment or restitution order against Zhao, and no assets were discovered against him,” Rahmani said. “When he is released from prison, he will have a lot of wealth.”
Former Binance CEO Changpeng Zhao arrives at the federal court in Seattle, Washington on April 30, 2024.
David Ryder | Bloomberg | Getty Images
CZ’s wealth is not affected
Zhao has grown Binance, the cryptocurrency exchange he co-founded in 2017, from a relatively unknown company into one of the most powerful players in the booming digital currency space.
Although Zhao is behind bars, his controlling stake in Binance means he will continue to be one of the richest people in cryptocurrency today.
Notably, since Zhao only pleaded guilty to one count of violating the U.S. Bank Secrecy Act (BSA) and was therefore considered a first offender, he settled with federal authorities, resigning as CEO but not giving up interests in his position or assets in the company. is frozen.
“Typically, personal assets that are not directly related to criminal activity may not be affected,” said Braden Perry, a former senior trial attorney at the Commodity Futures Trading Commission. “His assets may also be administered on his behalf while he is incarcerated.”
This is not the case with Sam Bankman-Fried, the former CEO and founder of the controversial cryptocurrency exchange FTX. Bankman-Fried, commonly known as “SBF,” saw his wealth dwindle to zero after his cryptocurrency empire went bankrupt in 2022.
“In terms of CZ’s personal wealth… he was still able to retain his stake in Binance and maintain his cryptocurrency holdings, which also contributed an unknown but significant amount to his overall wealth and net worth,” Joshua Vos, director of research at de CCData, told CNBC via email.
“Since there is no misappropriation or bankruptcy proceeding, it is highly unlikely that CZ’s wealth will be reduced to zero as was the case with SBF,” DeVos said.
What’s more, Zhao’s sentencing was much easier than that of former cryptocurrency rival Bankman-Fried. Bankman-Fried was sentenced to 25 years in prison for crimes related to cryptocurrency exchange operations.
Unlike the charges brought against Binance by Zhao, Bankman-Fried’s bankrupt exchange faces charges of fraud and misuse of customer funds.
Cryptocurrency rally gives Zhao a boost
Experts say Zhao’s net worth is likely to continue to rise as cryptocurrency prices rise, which tends to support Binance’s trading activity and thus increase his personal wealth.
“CZ will now be one of the wealthiest men in prison,” said Yesha Yadav, a law professor and associate dean at Vanderbilt University.
That’s true even after a series of legal troubles, including a Justice Department case against it, and several other high-profile lawsuits — including one from the Securities and Exchange Commission that is still ongoing.
The U.S. Securities and Exchange Commission accused Binance of repeatedly offering and selling crypto-asset securities without registration. It’s unclear when the case will be concluded.
Zhao’s personal net worth was estimated at $33 billion as of March 8, 2024, up from a year earlier, according to Forbes’ World Billionaires Rankings, which ranks the richest people based on stock prices and exchange rates. of US$10.5 billion.
The Bloomberg Billionaires Index, an independent measure of the world’s richest people, puts Zhao’s net worth at an even higher figure, at $42.9 billion.
CNBC was unable to independently verify Zhao’s overall net worth.
But Zhao is widely reported to own about 90% of Binance and much of his wealth comes from his stake in the company.
Binance is by far the world’s largest cryptocurrency exchange by trading volume and will reach $18.1 trillion by 2023, according to crypto market data company CCData.
About 80% of this amount (or US$14.4 trillion) comes from derivatives such as futures contracts, and the remaining US$3.7 trillion comes from spot transactions. Derivatives trading is an important part of Binance’s business.
Although Binance’s market share has dropped to 41.6% since Zhao resigned as CEO in November 2023, the company remains dominant, ahead of South Korean exchange Upbit, Dubai-based Bybit and US giant Coinbase .
Zhao You Said before He has personally invested in Bitcoin and Binance’s own BNB token, but he did not disclose the value of those assets. Binance Coin (BNB) is up 83% year-to-date at $576.
Lucas Kiely, chief investment officer of digital wealth platform Yield App, said Zhao “has a significant stake in the world’s largest cryptocurrency exchange by trading volume, which gives him the potential to benefit from the overall growth of the cryptocurrency market.” benefit from.
Kiely said the recent approval of spot Bitcoin exchange-traded funds in the U.S. has reignited interest in the cryptocurrency market and helped spark a new wave of institutional investment, which is sure to be a boon for Binance.
“Such developments could help Binance’s growth and, in turn, CZ’s wealth,” he told CNBC.
Zhao’s overall wealth took a partial hit – he was forced to pay a $50 million fine in addition to Binance being ordered to pay $4.3 billion in fines and forfeited funds for violating the U.S. Bank Secrecy Act and sanctions against Iran. Yadav noted that Zhao is also likely to have made some contribution to the billions of dollars Binance owes the government.
Yadav told CNBC that while CZ’s vast wealth is not directly threatened by his conviction and today’s sentencing, there could still be some indirect impact.
“The long-term negative impact on Binance will undermine the value of CZ’s investment in the cryptocurrency exchange,” Yadav said. “However, conversely, if Binance begins to embark on the path to recovery following today’s verdict, plea agreement, and regulatory arrangements, And CZ may even benefit as it regains market share over time.”
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