Finance The rise and fall of Changpeng ‘CZ’ Zhao, the ex-Binance CEO who pleaded guilty to anti-money laundering charges and could spend 3 years in prison Marielle Descalsota , Pete Syme , Aaron Mok , and Sarah Jackson Updated 2024-04-24T17:07:44Z Share icon An curved arrow pointing right.Share Facebook Icon The letter F.Facebook Email icon An envelope.It indicates the ability to send an email.Email Twitter icon A stylized bird with an open mouth, tweeting.
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Copy Link Save Article Icon A bookmark Save Read in app Angle down icon An icon in the shape of an angle pointing down.Binance founder Changpeng Zhao stepped down from his CEO role as a result of the DOJ’s probe.REUTERS/Darrin Zammit Lupi This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now.
Have an account? Log in .Changpeng Zhao, also known as CZ, has been one of the wealthiest people in crypto.
His rivalry with Sam Bankman-Fried nearly saw Binance save FTX from bankruptcy.But Binance had its own issues: Zhao has pleaded guilty to anti-money laundering charges, and could be imprisoned for up to three years .NEW LOOK Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily.
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Advertisement Sam Bankman-Fried isn’t the only crypto king to see his empire fall.
Changpeng Zhao, also known as CZ, was one of the wealthiest people in the industry as founder and CEO of crypto exchange Binance.In November, however, he stepped down from his role and pleaded guilty to charges that Binance violated US anti-money laundering requirements .
On Tuesday, the US Department of Justice said in a sentencing memo that prosecutors recommend he serve three years in prison and pay a $50 million fine.
This story is available exclusively to Business Insider subscribers.Become an Insider and start reading now.
Have an account? Log in .Here’s the story of Zhao’s dramatic career rise and fall:
Advertisement Changpeng Zhao is the founder of Binance, the world’s largest cryptocurrency exchange.Changpeng Zhao, who founded and served as CEO of Binance.Antonio Masiello/Getty Images Zhao — who’s often known as CZ — is one of the most prominent people in cryptocurrency, and has been the wealthiest person in the industry.
With a net worth of $42.6 billion, he’s listed as the 29th-richest person in the world, according to the Bloomberg Billionaires Index.
But crypto winter has taken a toll across the industry, and Zhao is no exception.His real-time estimated net worth is a far cry from the peak of his personal wealth: His net worth peaked at $95.9 billion earlier in 2023, the Bloomberg Billionaires Index shows.
Zhao’s interest in cryptocurrency began in 2013 when he first learned about Bitcoin, according to a 2018 Forbes report.His career in the up-and-coming digital currency industry started at Blockchain.info, where he served as the head of development.
Zhao founded Binance in 2017 and powered it to become the biggest cryptocurrency exchange by trading volume.The exchange handles some $76 billion in daily trading volume, Protocol previously reported.
In 2021 alone, Binance generated over $20 billion in revenue, according to Bloomberg.
Editor’s note: This story was first published in October 2022 and has been updated to reflect recent developments.
Advertisement Zhao was born in a rural village in Jiangsu province in China in 1977 to a family of teachers.Nanjing, Suzhou, China.Fang Daqing/VCG/Getty Images Zhao, who is Chinese-Canadian, moved to Vancouver in the late 1980s with his family, according to Forbes.
Zhao’s father, Shengkai, was a professor who was exiled to the countryside during the Cultural Revolution in China, according to the Maclean’s report.
Zhao said in a September blog post that his family had to wait in line outside the Canadian embassy for three days to procure visas.He added that he was “lucky to have been able to leave at that time.”
Shengkai immigrated to Canada to pursue a doctorate degree at the University of British Columbia, per Maclean’s.
After the Tiananmen Square protests in 1989, Zhao and his family followed his father and moved to Vancouver.
Zhao said he experienced food rationing growing up in rural China.”You get a ticket to buy meat,” Zhao told Fortune in a March interview.Zhao told Maclean’s that it wasn’t until he moved to Canada that he ever drank fresh milk, because it was so rare to find it in China.
Advertisement When Zhao moved to Canada, he held a number of part-time jobs, according to the Maclean’s report.
McDonald’s in Richmond, BC, Canada.Cheng Feng Chiang/iStock/Getty Images He started working at McDonald’s when he was 14 and worked there for two years, Dewi Mustajab, a spokesperson for Binance, told Business Insider.
Zhao also worked at a Chevron gas station and as a referee for volleyball games in his teens to earn money, per Maclean’s.
Zhao said in the blog post that moving to Canada “changed my life forever.” He added that he spent his “best years as a teenager” growing up in Vancouver.
Zhao is known to be frugal: He doesn’t own cars, yachts, or luxury watches.Instead, he has digital watches like the Apple Watch, and he recently bought a Toyota Velfire van, Mustajab said.
Advertisement Zhao studied computer science at McGill University in Montreal, the same school where his father worked as a visiting scholar.McGill University, which Zhao attended.JHVEPhoto/iStock/Getty Images Zhao’s interest in technology was fueled by a $14,000 286 DOS computer that his father — “a math whiz and programmer” — bought when was Zhao was in his teens, per Maclean’s.
Before attending McGill, Zhao enrolled in programming classes in high school and started coding when he was just 16 years old, per Bloomberg.
After graduating from university, Zhao worked first on the Tokyo Exchange, and from 2001 to 2005, on Bloomberg’s Tradebook, Mustajab said.
In 2005, Zhao quit the corporate life and moved to Shanghai to become a partner at the trading system company Fusion Systems.According to Zhao’s LinkedIn page, he left the company in December 2013.
Advertisement The vast majority of Zhao’s multibillion-dollar wealth comes from his controlling stake in Binance Holdings, per Bloomberg.
Cryptocurrency exchange Binance founder and CEO Changpeng Zhao speaks at a Binance fifth anniversary event in Paris, France, July 8, 2022.Staff/Reuters While Bloomberg estimates Zhao is worth around $42.6 billion from his majority stake in the cryptocurrency platform, it’s not a complete picture of his wealth.Bloomberg said it does not include cryptocurrency directly held by Zhao in his net worth, as the amount is not publicly available.
Zhao has personal cryptocurrency holdings in Bitcoin and Binance Coin, per a September report by Bloomberg.
In 2021, Binance had over 90 million users, Bloomberg reported, citing an estimate from Zhao.
Zhao is said to have a considerable amount of wealth from Bitcoin, having bought $1 million worth of the digital currency when it was just $600 a unit, per Maclean’s.
Binance declined to confirm Zhao’s net worth and the source of his wealth to Business Insider.
Advertisement But Zhao’s journey at Binance has been far from smooth sailing — the company has been embroiled in several controversies.Changpeng Zhao, founder of Binance.REUTERS/Darrin Zammit Lupi In October, some $570 million worth of cryptocurrency traded on Binance was stolen in a blockchain hack, according to the New York Times.Zhao told CNBC in an October interview that no users had lost money in the attack, and that “software code is never bug free.” The Binance hack is one of the biggest cryptocurrency hacks of all time.
Binance said in a blog post that in the event of a hack in the future, its validators will decide if the hacked funds will be frozen.The decision would be made through a series of “on-chain governance votes” — the system that manages and implements changes to the blockchain.
Binance added they would also consider implementing a “bug bounty reward system,” so users are incentivized to report bugs.
“Nearly $570 million were minted and taken by the hacker, $100 million are unrecovered and moved off chain by the hacker.No users or users funds affected,” Mustajab said.
Binance has also been criticized for its ties to China .Binance only delisted Chinese yuan-based trading pairs on the exchange in 2021, and served customers in China for several years, according to September article by Protos.Chinese authorities banned all crypto-related transactions in September 2021.
Zhao responded to these allegations in a blog post published in September, where he clarified that Binance was never incorporated in China and said it does not “operate like a Chinese company culturally.” He added that he is “a Canadian citizen, period.”
Binance also garnered controversy for enabling Iran-based users to trade cryptocurrencies on the exchange despite US-imposed sanctions, according to a July report by Reuters.Binance informed traders in Iran to liquidate their accounts in November 2018, but seven traders continued until September 2021 to use the account even after the ban.Binance did not respond to Reuters’ requests for comment at the time.
Advertisement Zhao was known for his rivalry with FTX cofounder Sam Bankman-Fried.
In 2022, Binance looked set to rescue SBF’s firm from bankruptcy, before backing out of the deal.Zhao Changpeng and Sam Bankman-Fried.Horacio Villalobos/CorbisAlex Wong/Getty Images Binance signed a non-binding agreement to acquire FTX, Zhao said in a Twitter post on November 8, 2022 .At the time, FTX was the third largest cryptocurrency exchange by trading volume after Binance and Coinbase, before filing for bankruptcy three days later.
It all started with a public spat on November 6, 2022, when Zhao announced on Twitter that Binance would be liquidating its FTT tokens, the cryptocurrency of FTX.
Anthony Scaramucci, who sold 30% of his business to FTX, told Business Insider in January 2023 that Bankman-Fried had been saying “nasty things” about Zhao during a fundraising tour in the Middle East – which may have prompted Binance to sell off its FTT holdings.
In a Twitter post , Bankman-Fried said that Zhao was “trying to go after us with false rumors,” and that FTX and its assets “are fine.”
But then Binance pulled out of the deal, and FTX filed for bankruptcy.
SBF was later found guilty on multiple fraud charges and has been sentenced to 25 years in prison.
Advertisement Binance then ran into legal troubles of its own, after the CFTC alleged it had violated trading rules.Binance logo is displayed on a mobile phone screen.Beata Zawrzel/NurPhoto via Getty Images In March 2023, the Commodity Futures and Trading Commission sued Zhao , Binance, and its former chief compliance officer, Samuel Lim, for allegedly violating trading rules.
It alleged a “willful evasion of federal law” because Binance ignored requirements to register the exchange, and helped customers to 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.”
The filing shows officers discussing transactions from the Palestinian militant group Hamas.”Like come on.They are here for crime,” Lim said in internal communications, per the filing.
Advertisement Zhao has split his time between Dubai and France.
He was previously based in Singapore.Marina Bay Sands in Singapore.Marielle Descalsota/Insider Zhao moved to Dubai in late 2021, where he leases an office to run what Bloomberg described as “a new phase” of Binance.Zhao also owns an apartment and a minivan in the city, the publication reported.
“I have always liked placed with diverse cultures,” Zhao told the Gulf News in an August 2022 interview.He described the city as “very pro-crypto,” according to a 2021 interview with Bloomberg.
Previously, Zhao lived in Singapore from 2019 to 2021.The city-state spent hundreds of millions of dollars investing in the sector amidst a crackdown on the industry in the US, UK, and China.
Advertisement In November 2023, Zhao pleaded guilty to anti-money laundering charges and stepped down from his role as CEO of Binance.Changpeng Zhao steps down from his role as CEO of Binance after he pleaded guilty to anti-money laundering charges.
Andrey Rudakov/Bloomberg via Getty Images Binance will pay a $4.3 billion fine in response to the verdict.
Part of the fine will go toward settling the lawsuit brought by the CFTC earlier this year, which accused Binance and Zhao of failing to stop illegal trading activity on the crypto exchange.
The crypto exchange is also pleading guilty to related charges, which could potentially put an end to a five-year Department of Justice investigation.
Advertisement In April 2024, the Justice Department recommended Zhao be sentenced to three years in prison and have to pay a $50 million fine.CZ, founder of Binance.Antonio Masiello / Getty Zhao’s attorneys in response suggested he be sentenced to probation, arguing, “No defendant in a remotely similar [Bank Secrecy Act] case has ever been sentenced to incarceration.Mr.Zhao should not be the first.”
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