As the crypto industry continues to navigate through regulatory mazes and legal challenges, a paradox emerges in the fortunes of its leaders. Changpeng Zhao (CZ), the founder and former CEO of Binance, stands as a prime example, witnessing a significant increase in wealth despite facing serious legal troubles. It seems that crypto people are becoming the new financial establishment.
Zhao’s Wealth Surge in 2023
In 2023, CZ‘s net worth experienced a dramatic increase, surging by about $25 billion to an estimated $36.2 billion. This growth is primarily attributed to the recovery in crypto markets, with Bitcoin’s value soaring over 160%, and Binance’s heightened trading volumes. Despite pleading guilty to money laundering and sanctions circumvention charges, CZ’s wealth growth starkly contrasts with his legal predicaments.
Comparative Wealth of Crypto Entrepreneurs
Although lower than its peak of nearly $97 billion in early 2022, CZ‘s wealth still places him among the richest in the crypto industry. Notably, Forbes listed Sam Bankman-Fried (SBF), the founder of the now-bankrupt crypto exchange FTX founder convicted of fraud, as the second-richest crypto person behind CZ earlier in 2023. Other crypto entrepreneurs, including Brian Armstrong of Coinbase and the Winklevoss twins, have also seen their fortunes swell despite the industry’s regulatory challenges.
SEC Lawsuits and Settlements
In the summer of 2023, the SEC filed lawsuits against Binance (link) and Coinbase (link), which are still pending. Among other things, both are accused of violating U.S. securities laws by allowing trading in security tokens. While CZ was personally listed as a defendant in the Binance lawsuit, the SEC took no action against the CEO of Coinbase.
Binance also faced lawsuits from the U.S. SEC, the U.S. Department of Justice (DoJ), and other U.S. authorities. In November, CZ and Binance pleaded guilty and settled with the CFTC and FinCen. CZ agreed to pay a $150 million fine and stepped down from his roles at Binance, though he maintains an ownership stake in the exchange. These enforcement actions by the U.S. Commodity Futures Trading Commission (CFTC) and the Department of Justice (DoJ) highlight the increasing regulatory scrutiny on crypto exchanges. However, the U.S. settlement did not include the SEC’s action against Binance and CZ. This is still ongoing.
Despite his substantial wealth, Zhao faces a potential prison sentence of up to 18 months, with a federal judge ruling him a flight risk due to his vast fortune and residency in the UAE. This scenario underscores the complexities crypto industry leaders face, balancing immense wealth with legal and regulatory challenges.
The New Financial Elite
The story of Changpeng Zhao, amidst the broader narrative of the crypto industry, paints a picture of a sector that seems almost unstoppable in its growth and influence. Despite significant legal and regulatory challenges, the astonishing wealth accumulation by crypto entrepreneurs like Zhao suggests the emergence of a new financial elite. This phenomenon indicates that, while the industry faces scrutiny and calls for greater regulation, the financial successes of its leaders are creating a paradigm shift in the global economic landscape. The resilience and adaptability of cryptocurrency, coupled with the rise of its key figures, underscore a transformative era in finance, where traditional barriers are being redefined, and new forms of wealth and power are taking shape.
