Changpeng “CZ” Zhao is the founder and CEO of Binance, the world’s largest crypto exchange.
On March 27, 2023, Zhao and Binance were both named in a suit brought by the Commodity Futures Trading Commission (CFTC) against the exchange in the U.S. District Court for the Northern District of Illinois.
The suit alleges, among other things, that Binance offered an illegal derivatives trading platform in the U.S.
Binance, the suit claims, offered derivates trading to U.S. residents in Bitcoin (BTC), Ether (ETH) and other cryptocurrencies—all of which the CFTC labeled as commodities—by encouraging U.S.-based customers to emply virtual private networks (VPNs) to evade U.S. regulations.
Well-known within the industry, Zhao started to receive broader news coverage in November 2022 during the implosion of rival exchange FTX.
Zhao played a role in FTX’s unraveling, and even offered to acquire the company at the height of the liquidity crunch that ultimately led to its bankruptcy. The offer didn’t last, once the extent of FTX’s problems became clear.
”As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” CZ posted in a Nov. 9 tweet.
After the fall of FTX, Zhao has become one the biggest names left standing in cryptocurrency, and Binance’s business now vastly outpaces every other crypto exchange by wide margins.
Though his wealth has taken a hit as the crypto market has sunk, 45-year-old Zhao still ranks among the 600 richest people in the world, according to Forbes data, with an estimated net worth of more than $4 billion.
Early Life and Education
Zhao was born in the Jiangsu province of China in 1977. His parents were teachers, and his father was once a professor at the University of Science and Technology in Hefei, a leading Chinese university at the time.
The 1980s in communist China was a tumultuous time for Zhao and his family. In a Binance blog post, Zhao writes of how he fled China at age 12 following the Tiananmen Square massacre.
“On Aug. 6, 1989, my mother and I left China and emigrated thousands of miles away to Canada. For those who know Chinese history, this is two months after the events of June 4, 1989,” wrote Zhao.
Zhao and his family waited outside the Canadian embassy for several days for an expedited visa to leave the country following the bloody crackdown on those critical of the Chinese Communist Party.
“I remember the line outside the Canadian embassy was three days long. We had to take shifts at night to keep our position in the queue,” Zhao recalled. “It changed my life forever and opened up endless possibilities for me.”
Zhao spent his teenage years in Vancouver, where he worked various jobs, including at McDonald’s as a burger cook.
Even before Zhao enrolled in university, the math whiz expressed an interest in computer programming courses. He later went on to study computer science at McGill University in Montreal.
After university, he interned for a subcontractor on the Tokyo Stock Exchange before working for Bloomberg Tradebook in New York for several years, where he developed software to match trade orders.
Zhao Founded Binance
In 2005, Zhao moved back to China and tried his hand at several different tech startups before getting involved in crypto and founding Binance.
“I was a serial entrepreneur looking to build a successful start-up before I understood my passion,” he says of his life before Binance.
In September 2017, the Chinese government banned cryptocurrency exchanges from operating in China only a few weeks after Zhao launched Binance. Nearly 30 years after fleeing China for the first time, Zhao was forced to depart again.
The move hardly slowed Binance’s growth, and by 2021, a peak year for crypto, Binance reportedly handled more than $34 trillion in trading volume.
However, it hasn’t always been smooth sailing. Binance has been embroiled in several notable incidents.
In May 2019, Binance had $40 million worth of Bitcoin (BTC) stolen in a hack. But the episode ended well, with customers being fully compensated.
Most of Binance’s tussles have come from regulators. Last year, the world’s largest exchange was banned by U.K. regulators—the same year it faced a money laundering probe in 2021 in the U.S.
For regulatory reasons, Binance has a U.S. subsidiary, Binance. U.S, a separate offshoot from the main Binance.
Perhaps to appease regulators, Zhao switched tracks last year and announced the company was ditching its nomadic structure.
“I am a technology entrepreneur, and we are making this pivot into a fully-regulated financial business,” he said of his plans to put down roots and establish a formal, fully compliant business.
Despite these plans, the company remains unconventional, without a standard company structure and no official headquarters.
Binance and the Collapse of FTX
Investors around the world are concerned that Binance’s dominant share of the global crypto exchange market poses big risks to the industry. These risks have only grown after the implosion of FTX.
In fact, CZ played a major role in the decline and fall of Sam Bankman-Fried’s crypto empire.
In early November 2022, CoinDesk reported that the balance sheet of Alameda Research, Bankman-Fried’s trading firm, was propped up by FTX’s native token, FTT. Zhao tweeted that he was planning to sell off Binance’s position in FTT “due to recent revelations that have come to light.”
Zhao’s company had invested in FTX three years earlier. In 2021, it cashed out its equity in return for a $2.1 billion payout. Crucially, part of this payout was denominated in FTT.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
Ultimately, this move led broader crypto markets to realize that the low-liquidity FTT token was propping up an insolvent FTX-Alameda ecosystem.
A run on the bank occurred, and customers scrambled to get their money out of FTX. But by that time, the money wasn’t there, as it had been sent by FTX to Alameda for trading purposes—trades that didn’t end well.
Zhao stepped in, announcing Binance would acquire FTX in a development that stunned markets. But he pulled out of the deal following a swift due diligence process. He realized that the scale of the damage at FTX—an $8 billion hole in the company’s balance sheet—was too great.
Crypto’s No. 1 Player
Zhao is now seen as the unquestioned leader since the FTX debacle.
“Well played; you won,” Bankman-Fried tweeted out to Zhao, although it is clear that the debacle was caused by the nefarious actions of Bankman-Fried himself, rather than Zhao.
20) At some point I might have more to say about a particular sparring partner, so to speak.
But you know, glass houses. So for now, all I’ll say is:
well played; you won.
— SBF (@SBF_FTX) November 10, 2022
The kingpin of the largest company in the space, Zhao has been vocal that exchanges need to promote transparency and help mend the broken reputation.
The Binance founder is pushing for a proof-of-reserves model in the wake of the FTX scandal. Under the system, customers’ assets can be proven through the use of a public blockchain.
But critics say that even Binance remains worryingly opaque. Without knowing Binance’s liabilities, having proof of reserves doesn’t matter much.
The Future of Binance
The future of Binance will invariably be tied to the future of cryptocurrency as a whole, such as the size of the company.
Regulation will no doubt come in hard. It’s an eventuality that is vitally needed in the industry, given the numerous scandals that have rocked the space.
Binance’s stranglehold of market share is also a concern no matter what way you swing it.
Investors will close their eyes and pray that Zhao and Binance are better run than the myriad of other centralized players that have been embroiled this year. They will hope that nothing is going on behind the scenes. The unfortunate truth is that right now, however, that is all that they can do—hope.
FTX’s collapse was a watershed moment for cryptocurrency, and Zhao is the one who carries the torch.
So far, in crypto and outside of it, Zhao has dealt with every obstacle with aplomb—and nothing shows that he isn’t capable. Nonetheless, the responsibility remains immense.
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