Even as he faces prison time, Binance founder plans comeback
SAN FRANCISCO: He enjoyed a homecooked dinner in Montana with a former US senator. He visited Telluride, Colorado, and Moab, Utah, a vacation spot known for its national parks. And he chatted about start-ups with Sam Altman, the CEO of OpenAI.
After pleading guilty to a moneylaundering violation in November, Changpeng Zhao, the founder of the cryptocurrency exchange Binance, did not sit still. A federal judge denied his request to return home to Dubai, United Arab Emirates, but Zhao, 47, was free to roam the United States. So he spent the past five months travelling the country, networking with other entrepreneurs and laying the groundwork for his next act.
When he pleaded guilty, Zhao, once the most powerful figure in the global crypto industry, resigned as Binance’s CEO and agreed to pay a $50 million fine. Later yesterday, he was scheduled to be sentenced in federal court in Seattle, with prosecutors seeking a threeyear prison term, while defence lawyers have asked for probation and no time behind bars.
But Zhao, who goes by the initials CZ, is already looking to the future. He has a $33 billion fortune, according to Forbes, and he announced in March that he was starting a new web platform to promote online education.
Zhao has also expressed interest in investing in artificial intelligence and biotechnology, and has corresponded with other executives. Late last year, he and Altman exchanged text messages, two people familiar with the matter said, and discussed the challenges of expanding a start-up worldwide.
Many powerful crypto executives have faced federal lawsuits and criminal charges since the multitrillion-dollar industry imploded in 2022. Some have gone to prison, while others have enjoyed the high life before being arrested. Zhao’s fate is likely to be kinder than most.
WIDESPREAD SUPPORT
His frenetic activity since November contrasts with the consequences faced by Sam Bankman-Fried, the founder of the collapsed crypto exchange FTX. Once Zhao’s greatest rival, BankmanFried was largely ostracised after FTX imploded in 2022 and prosecutors charged him with stealing $8 billion in customer funds. A jury found him guilty of fraud last year, and he was sentenced in March to 25 years in prison.
Zhao, who pleaded guilty three weeks after Bankman-Fried was convicted at trial, still enjoys widespread support in the crypto industry. Dozens of current and former Binance employees have submitted letters to Judge Richard Jones, the federal judge overseeing Zhao’s case, asking him to impose a lenient sentence. And many crypto entrepreneurs, investors and dignitaries have continued supporting Zhao, court records show.
A short prison stint “is a small price to pay to be a billionaire for life,” said John Reed Stark, a former Securities and Exchange Commission official and a critic of the crypto industry. “The industry just does not care about the extraordinary crypto crime wave ushered in by people like CZ.”
Representatives f or Zhao and OpenAI declined to comment.
For much of Binance’s existence, Zhao was dogged by accusations that he had broken the law to build a crypto empire. Binance was the world’s largest crypto exchange, processing as much as two-thirds of all transactions. And Zhao became a crypto celebrity, with nearly 9 million followers on the social platform X, formerly known as Twitter. His posts helped set off a chain of events that led to FTX’s demise in 2022.
Last year, Binance faced its own reckoning. The company agreed to pay $4.3 billion to the US government to settle charges that it allowed criminal activity to flourish on the exchange.
US officials said Binance violated economic sanctions, allowing access to its platform to people in countries like Cuba, Syria and Iran. Zhao failed to set up proper anti-money-laundering controls, prosecutors said, and let customers sign up for accounts without providing the basic personal details that financial services firms usually require.
“Zhao violated US law on an unprecedented scale,” prosecutors wrote in a court filing last Wednesday. “Zhao’s sentence should reflect the gravity of his crimes.”
SEES HIMSELF AS MENTOR
Zhao started talking about his next act the moment the charge against him was announced. In a post on X the day of his plea hearing in November, for which he appeared in person in federal court in Seattle, he said he was interested in investing in areas like crypto, biotechnology and AI.
“I may be open to being a coach/ mentor to a small number of upcoming entrepreneurs,” he wrote. “If for nothing else, I can at least tell them what not to do.”
In the filing last week, prosecutors said Zhao had travelled throughout the US, visiting New York, Los Angeles, Telluride and Moab. Zhao, who grew up partly in Canada, has spent some of his free time skiing and snowboarding, a person who knows him said.
Zhao met Altman in person about a year ago, a person with knowledge of the matter said. They were in contact again after a leadership battle at OpenAI in late November, two people familiar with the exchange said. The next month, over hot pot in Los Angeles, Zhao told Ronghui Gu, a computer science professor at Columbia University, that he had communicated with Altman.
In a letter filed in court last week, Zhao said he had spoken with “a number of biotech start-ups” and planned to make disease prevention a focus in the next chapter of his life.
“I’d like to help fund small research labs with the aim of curing diseases once and for all, as well as providing medical access to billions in the world using blockchain technologies,” he wrote.
‘‘ The industry just does not care about the extraordinary crypto crime wave ushered in by people like CZ. JOHN REED STARK Former Securities and Exchange Commission official