Zhao Changpeng, the founder and CEO of Binance, the world's largest cryptocurrency exchange, has stepped down from his role following criminal charges of money laundering brought by the U.S. Department of Justice. The announcement on November 21 marks a significant shift for Zhao, who began his career as a dedicated programmer, often working over ten hours a day on online trading systems for the Tokyo Stock Exchange and Bloomberg.
Under Zhao's leadership, Binance achieved the capability to process 100,000 transactions per second with less than a 5-millisecond delay, surpassing the daily trading volume of five Hong Kong Stock Exchanges. However, this week, his journey with Binance came to an abrupt halt.
Binance admitted to violating U.S. anti-money laundering regulations, unlicensed remittance, and sanction violations. The company agreed to a $4.3 billion fine, including $2.5 billion in forfeitures and $1.8 billion in penalties, setting a record for official fines in the cryptocurrency sector.
As part of the plea agreement, Zhao is barred from participating in Binance's operations for three years but is allowed to retain his majority stake in the exchange, remaining its largest shareholder. In a company-wide email, Zhao humorously bid farewell to his team, asking them not to complain about his absence while they continue to work hard.
Binance faced multiple enforcement actions from various U.S. agencies earlier this year. The Commodity Futures Trading Commission (CFTC) filed a civil lawsuit in March, accusing Binance and Zhao of offering unregulated derivatives trading to U.S. citizens. In June, the Securities and Exchange Commission (SEC) accused them of mishandling customer funds. These accusations drew parallels to FTX, Binance's former main competitor, which went bankrupt due to illegal misappropriation of customer funds, resulting in an $8 billion loss in user deposits.
In its official statement, Binance acknowledged its guilt in compliance violations while distinguishing itself from FTX, emphasizing its commitment to maintaining a 1:1 storage guarantee for user assets. The U.S. regulators did not accuse Binance of misappropriating user funds or market manipulation.
Since its inception in September 2017, Binance quickly became the world's largest cryptocurrency exchange in less than seven months. By January 2018, it had over 5 million registered users and a daily trading volume exceeding $10 billion. Zhao, the only Chinese person among the top ten in Forbes' first list of cryptocurrency billionaires, appeared on the magazine's cover.
Binance supports about 120 cryptocurrencies, over 100 wallets, and 240 trading pairs. Zhao proudly spoke of Binance's strict screening standards, accepting only credible, high-liquidity cryptocurrency projects. The platform has received over 5,000 coin listing applications, with a selection rate of 3%, lower than Harvard University's acceptance rate.
Following its rapid expansion, Binance faced years of scrutiny from regulatory bodies. After China banned cryptocurrency trading, Binance moved its headquarters from China to Japan and later to Malta, Singapore, and Bermuda, seeking countries with more relaxed cryptocurrency regulations. Eventually, Binance became a company "without a headquarters."
U.S. authorities began collecting evidence of Binance's alleged violations of anti-money laundering laws and other compliance regulations. The turning point was the establishment of Binance.US, which claimed to operate independently but was reportedly fully supported by Zhao, who controlled the company. Binance.US provided a technical backdoor allowing U.S. users to bypass compliance restrictions, a point Binance admitted in its plea agreement.
Following years of investigation and multiple charges by U.S. departments this year, major U.S. banks cut off access to Binance.US, forcing the company to freeze most of its trading activities. As part of the plea agreement, Binance will "completely exit" the U.S. and appoint a five-year monitor to oversee its sanctions compliance program. Binance US, operating independently, will not be affected and will continue its operations.
Zhao, a Canadian citizen born in Jiangsu, China, often mistaken for a Chinese national, has become a mysterious figure in the physical world, frequently traveling to Singapore, Dubai, Paris, and beyond. As an active opinion leader in virtual spaces, Zhao tweeted over 627 times in 2020, with a following that has now exceeded 8.75 million. According to Binance insiders, about 15% of his tweets were requests from various levels of employees, and 5% were unfiltered personal expressions.
In a 2021 interview with the Chinese financial media LatePost, Zhao likened the "decentralization" of cryptocurrencies to a gray area, navigating between freedom and compliance. His "15 Personal Principles" reflect his understanding of the industry's rapid changes and the need for flexible goals.
After years of rapid growth in a regulatory gray area, Binance has admitted to insufficient compliance management to match its business growth. Zhao revealed that after leaving Binance, he would not start another business but would invest in blockchain, Web3, DeFi, artificial intelligence, and biotechnology. He also expressed a willingness to mentor a few entrepreneurs privately, advising them on what not to do.
Richard Teng, Binance's global regional market head, has succeeded Zhao as the new CEO. Teng's appointment, with his extensive compliance background, including roles as CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market, Chief Regulatory Officer at the Singapore Exchange, and Director of Corporate Finance at the Monetary Authority of Singapore, signals Binance's shift towards compliance.
According to Coindesk, Binance executives unanimously believe that Teng is the only leader who can continue building the company according to Zhao's vision while bridging the gap between the industry and regulatory bodies. Teng stated in his appointment announcement that he aims to reassure Binance users about their finances, security, and protections. The company will focus on cooperating with regulators and the cryptocurrency industry to address challenges in compliance, security, law enforcement cooperation, and user transparency, aiming to become stronger than ever.
