During the first few months of this year — back when buying digital tokens named after dog memes was still seen, at least in some of the most forward-thinking circles, as a perfectly reasonable way to participate in finance’s bright new future — the cryptocurrency exchange Binance promoted a new, low-risk way to get in on the action. It urged its customers to invest in something called TerraUSD. The token was what’s known in the trade as a “stablecoin,” a type of cryptocurrency that functions a bit like a savings account and promises to always be worth $1. Binance told customers who used its service to buy, sell, and invest in various cryptocurrencies that this particular stablecoin offered something special: the promise of annual returns of almost 20%. TerraUSD, Binance suggested to customers, could be somehow both “safe” and “high yield.”
As crypto enthusiasts know well, and as anyone accustomed to the normal rules of finance can probably guess, Terra turned out to be neither safe nor high yield. The coin was a Ponzi scheme, critics say, the beginning of a collapse that sent Bitcoin prices plummeting and caused companies across the industry to hastily lay off employees and freeze customer withdrawals. Bitcoin is down nearly 70% from its peak in November, and the industry has named the downturn the crypto winter.
This has been bad news for investors swept up in the frenzy, as well as for Binance itself. On May 16, Chief Executive Officer Changpeng Zhao disclosed the extent of Binance’s own Terra-related losses. The company’s stake had been worth $1.6 billion but was now worth close to zero. Not that Zhao was heeding or issuing any warnings. “So, there’s a couple of things about me,” he said in an interview that day. “I don’t really care much about money.”
The comment, made as he sipped a $14 glass of orange juice at a French restaurant in a Four Seasons hotel in Dubai, was hard to believe, coming as it did from the richest man in an industry that’s entirely about money. Zhao is slender and has a shaved head, soft voice, and wardrobe that seems to consist exclusively of black Binance shirts. He’s also something of a cipher. Depending on who’s talking, he’s either a) pioneering a revolutionary system in which a group of vertically integrated digital currency giants—including Binance and competitors such as FTX—will replace not only the world’s stock exchanges but also the entire global financial order, or b) running the world’s largest unlicensed casino.
Back in January, Zhao—CZ to the cryptoconversant—had been one of the 10 wealthiest people in the world, at least on paper. His net worth has cratered along with the price of Bitcoin, falling from $96 billion to $11 billion, according to the Bloomberg Billionaires Index. Even so, Binance remains the biggest company in crypto by a mile, processing more transactions than the next four exchanges combined. Each day more than $50 billion changes hands on the platform, which generally takes a 0.1% fee. In practice, that means Zhao, who is by far the company’s largest shareholder, makes money whether its customers are buying or selling. “Actually, what amazed me was the resilience,” he said, referring to the Terra collapse. “There’s no bailouts. There’s no central bank. No government intervention.” The market crash was ongoing, but in Zhao’s mind there wasn’t much to see. The industry, he said, was marching on.
Zhao relocated to Dubai late last year. The futuristic desert city — where foreigners outnumber locals by 9 to 1, where tourists ski indoors in 110F heat, and where any sense of place was long ago obscured by the vast wealth generated by its oil-rich neighbors — was a fitting location for someone who at times has seemed like a man without a country. A China-born Canadian citizen who emigrated to Vancouver at 12 and graduated with a degree in computer science from McGill University in Montreal, Zhao has bounced around the world for his entire adult life, rarely staying anywhere for more than a few years.
In his early twenties he wrote code for the Tokyo Stock Exchange. Then came a stint in New York at Bloomberg LP (which publishes this magazine). And then it was on to Shanghai, where he co-founded a company that developed software for high-frequency traders before starting Binance in 2017. But the Chinese government banned crypto exchanges the same year, and he went on a search for a jurisdiction that wouldn’t try to throw his company out or fine him for selling unregistered securities. “I was living out of two suitcases,” he said. “Actually, one big suitcase and one small suitcase.”
In Dubai, he finally felt at home. He bought an apartment, got a minivan, moved his possessions, and leased an office as part of a new phase of Binance that he described as being “the adults in the room, basically.” He noted that, at 45, he was at least a decade older than most crypto entrepreneurs and boasted about a close relationship with the Emirati government. Crypto was a much sounder investment than critics realized, he said, and Binance would be the company to prove it. “We have 120 million users who trust us with their life savings,” he said. “We protect our users. We communicate with governments and regulators. You know, we’re the stable guys.”
It was an audacious claim. Money laundering, fraud, and hacking have been part of the industry’s history, and even the most respectable crypto projects can seem, to the non-laser-eyed, lightly dusted with sketch. But at Binance the sketchiness has a certain completeness to it. The company is currently the target of investigations by almost every major US financial regulator—the Department of Justice, the Commodity Futures Trading Commission, the Internal Revenue Service, and the Securities and Exchange Commission—and others around the world. Binance portrays these investigations as part of a good faith negotiation it’s having with governments, which, in its view, just haven’t known what to make of crypto. But it’s not at all clear the regulators see it that way.
Binance, whose history is recounted here based on court documents, corporate filings, and interviews with more than 40 current and former employees and business partners, grew huge by offering unregulated bets on smaller digital tokens, some of which are called shitcoins. (The best known of these, Dogecoin, was initially started as a joke and now has a market valuation of $8 billion.) From there, Binance expanded to highly leveraged financial products tied to the value of those coins. These derivatives are illegal in many jurisdictions, but that hasn’t affected Binance, because it hasn’t been based in any jurisdiction. For years, critics have warned about potential loopholes that could make it possible for criminals and money launderers to move money through the exchange. In June, Reuters reported that Binance was used to launder at least $2.35 billion, including funds from dark web drug markets, North Korean hacking groups, and run-of-the-mill scammers.
Binance says these claims are misleading and points to a 120-person security and investigations team that includes former senior law enforcement officials from the US, UK, and Europe. As far as Zhao is concerned, Binance has merely been operating as an offshore exchange—calling to mind either a modern Cayman Islands bank, or, less flatteringly, the Republic of Pirates, the lawless pseudo-government that controlled trade in the West Indies in the early 18th century. Either way—and Zhao would much prefer the Caymans analogy—he said those days are over. “Office, headquarters, parent company—at the beginning, we told them we don’t have that, and of course they got all pissed off,” he said, referring to questions from regulators. “So over the last year, we set all that up.”
In seeking accommodation after years of pushing the boundaries of the law, Zhao is following a path popular among tech disrupters, including Airbnb, Uber, and PayPal: Ignore the demands of governments for as long as possible. Then, when you’re big enough, work with said governments to lock in market share. But crypto exchanges are now intertwined with much of global finance, and regulators have already signaled their desire to make an example of what they regard as the worst actors, setting up a confrontation of potentially epic proportions. When it’s all over, Zhao could wind up under criminal indictment. Or he could be the richest man in the world.
Binance has always presented itself as a decentralized company—if “company” is even the right term for what Zhao is building. Legally speaking, a Cayman Islands firm named Binance Holdings Ltd. owns its trademarks (such as the logo tattooed on Zhao’s right forearm). That entity’s ownership has never been disclosed. Zhao is the sole owner of Binance Capital Management, registered in the British Virgin Islands, which bought the crypto data site CoinMarketCap for a reported $400 million and put up $200 million for a stake in a company that planned to take Forbes public. Many Binance operations, such as the ones in Malta, Singapore, Ireland, France, and Italy, are also entirely owned by Zhao, either directly or through an entity he controls, according to corporate filings. Most of the trades on Binance go through the flagship exchange, Binance.com, which is based in who knows where and owned by God knows whom.
Zhao has said in interviews with the Chinese media that he only uses the term “company” for the sake of outsiders. As far as he’s concerned, Binance is an “organization.” Employees are “team members.” Whatever it is, Binance doesn’t appear to have a traditional shareholder structure or a board of directors. Zhao, in keeping with crypto ideology, says he’s a fan of leaderless movements that coalesce around the immutable logic of the blockchain. But when it comes to Binance, former employees and investors say, it’s Zhao alone who controls it. “At the end of the day, he’s the holding company,” says a former executive, who, like others quoted in this article, requested anonymity to avoid angering Zhao.
For most investors in Binance, none of this matters. Their stake in Zhao’s exchange comes not from equity—Binance appears to have hardly any external shareholders—but by way of its token, known as BNB. Today, the coins trade for about $220 each, at an implied total market value of around $36 billion, but Binance first sold them for 15¢ each in 2017 as part of an ICO—short for initial coin offering, an unregulated crypto version of an initial public offering. “Blockchains have no borders,” Binance’s investor prospectus declared.
During the company’s early days, anyone who wanted to trade on Binance—unlike on a regulated exchange such as Coinbase—first had to acquire Bitcoin. They could transfer funds from a bank account to a regulated exchange before sending them to Binance, or they could go outside the banking system, say, by selling something for crypto (a used car, opioids) or by buying crypto from a fellow enthusiast and paying cash. Binance.com allows anyone to open an account from almost anywhere in the world with just basic personal details and an email address—nothing that proves who they are. These days, users with unverified accounts can’t do much, but for years they were allowed to withdraw two Bitcoins a day, worth as much as $120,000 before the policy changed in 2021. The company dropped the maximum limit to 0.06 bitcoins, or about $1,200 a day in today’s prices. “We are probably one of the first companies to grow in 180 countries at the same time,” Zhao now says—in other words, almost all of them. “We had users everywhere. We had teams everywhere.”
But everywhere didn’t mean nowhere. Zhao himself has been a nomad, working out of hotel rooms, rental apartments, and resorts all over the world, while communicating with staff via text, email, and video calls. But for years, former employees say, Binance also had a clandestine home base. This was inconvenient, not only because it went against the company’s professed ideology of being a decentralized “organization” but also because the home base happened to be in China, where crypto was verboten. And so, even as Beijing shuttered rival exchanges, more than 100 Binance employees reported each day to an office in the Huangpu district of Shanghai, where they sat at conventional workstations with bilingual name cards on their desks. They were hired and applied for business visas using a corporate alias, Ruique Cultural Development, and were, they say, urged to be careful wearing company merch in public and to avoid telling anyone where they worked.
Then, in November 2019, they were told to pack up and leave the premises. They boxed up computers, desk toys, and other knickknacks. Some balled up their name cards and ran them under water in the bathroom sinks to make them unreadable, according to several who were there at the time. They were reassigned to a constellation of coworking spaces around Shanghai or they went abroad as Zhao did.
When the Block, a crypto news outlet, reported that the Huangpu office had been the subject of a “police raid” as part of China’s crackdown on crypto, Zhao denied it. Not only had there been no raid, he claimed, there was no Binance office in Shanghai at all. “No police, no raid, no office,” he tweeted. He referred to the Block’s report as “FUD,” an acronym for “fear, uncertainty, and doubt” used as a slur in crypto circles to describe any news deemed unhelpful to perceptions about Bitcoin. “We will be suing,” he added. The Block updated its story, clarifying that the term “raid” was disputed, but it otherwise held firm.
Zhao didn’t sue. Nor, during the interview at the Dubai Four Seasons, did he deny the existence of a Shanghai office. “Some government official visited the office,” he said. “It wasn’t even a regulator. He was just a government official.” Then he launched into a bit of media criticism. “You can write two very different narratives as a journalist, right?” he continued, with a conspiratorial smile. “You can say, ‘This guy escaped into a restaurant,’ or you can say, ‘The guy walks slowly into the restaurant and enjoys the sunshine view.’ ”
He paused and looked around, as if to indicate his preference. We were in a completely empty room that had been vetted by Zhao’s security guard. There was also sun coming in through the windows. He continued: “There’s a lot of narratives around that are based on very inaccurate information.”
The cryptocurrency industry has always had a thing about narratives. National currencies, Bitcoin boosters have long pointed out, are based on little more than collective belief and government decree, the “fiat” in fiat money. But while the dollar benefits from the widespread agreement that it will more or less hold its value over time, cryptocurrencies have spread because of a shared conviction among the faithful that they will go way up, with little regard for their inherent usefulness. “Why? I don’t know f—ing why. It could be a Ponzi scheme,” said Dave Portnoy, the sports media entrepreneur who, briefly, served as a mascot to meme stock investors, when describing an investment in an obscure token that wasn’t traded on Binance. “If it is a Ponzi, get in on the ground floor.”
Binance, says a trader who uses the exchange, is “a massive shitcoin casino.” The person, who asked for anonymity because he’s worried Binance might retaliate and freeze his account, says Zhao deserves credit for recognizing that a big part of crypto’s appeal was pure speculation. “He took the dumbest parts of the industry and made it very easy to use.” The message from Binance has always been, the trader says, “go buy your Dogecoins and get rich.” A Binance spokeswoman, Jessica Jung, notes that some crypto exchanges offer even more tokens than Binance and that the company employs a “rigorous process” to vet its listings. She says that after Terra’s collapse Binance began evaluating how coins are advertised.
Even so, Binance’s approach to shitcoins became a key differentiator during the company’s early days: Whereas Coinbase, the big US exchange, offered just three tokens, Binance sold more than 100. It hawked them like protein shakes, with a multilevel marketing-style referral program in which influencers received a cut of the trading fees of anyone they referred. Binance ran contests in which users with the highest trading volumes competed for prizes, including Lamborghinis and Maseratis, while volunteers, known as Binance Angels, promoted the company in Telegram chats and threw in-person events to spread the wisdom of putting your money into crypto. Binance says the Angels work for free, motivated not by a desire to get rich, but by a love of the crypto community. “They are like priests,” says co-founder He Yi, a former TV host who refashioned herself as a crypto influencer and is now the company’s chief marketing officer.
Despite claims made in the ICO that Binance would be a “pure crypto” exchange, Zhao seems to have harbored much broader ambitions almost from the beginning. A former product manager recalls being told in a 2017 job interview that Binance would seek to dominate not only the market of cryptocurrency exchanges but also a stock exchange like Nasdaq. To do that, it would need to serve customers who didn’t already own crypto, which would mean dealing with banking systems and regulation. “The early crypto adopters, they’re OK with offshore,” Zhao said at the Dubai Four Seasons. “But the rest are average users. They probably prefer a regulated exchange.”
Other crypto exchanges had made similar calculations, but while Coinbase developed policies that seemed designed to keep US regulators at bay, such as requiring users to show a government ID, Binance adopted an approach in keeping with its more freewheeling ethos. Binance.com would remain an unregulated exchange, but the company would also work to set up regulated local exchanges where users could buy crypto with dollars or other national currencies.
Binance courted governments in Japan, Malta, and Singapore, which all eventually moved to block it from opening, while regulators elsewhere—including the Netherlands, South Africa, Thailand, and even the Cayman Islands—warned that the exchange wasn’t allowed to operate locally. Zhao described these failures as setbacks, part of a process of “looking at multiple places to try to see which would become more favorable towards crypto.”
Things were even more chaotic in the UK, where there were two competing Binance operations—a hallmark, former employees say, of a scattershot business strategy that fueled intense internal rivalries. The two subsidiaries had so little contact that an executive at one said he only discovered the other when he was congratulated on having hired someone he’d never met. Binance’s Jung says the UK teams worked together. “It’s not scattershot,” she says, of the company’s strategy. “It’s purposeful.” In June 2021 the UK’s Financial Conduct Authority ordered one of the subsidiaries, Binance Markets Ltd., to halt any “regulated activities” and to display a notice on its website indicating that it wasn’t authorized to do business in the country. It declared Binance “not capable of being effectively supervised.” Binance displayed the notice on its UK site, but Binance.com remained open to traders in the country, since, legally, it has nothing to do with the chided British affiliate.
In 2019, Zhao formed Binance.US, which he said would be totally independent and seek to comply with US laws by limiting access to riskier offerings. But in 2020, Forbes reported that it had obtained a leaked document describing a proposed “bait and switch” strategy in which Binance.US would be a ruse designed to draw scrutiny away from the main exchange. Binance said the proposal had been misrepresented and sued for defamation, with Charles Harder, the lawyer famous for taking down Gawker Media on behalf of Peter Thiel, leading the case.
Forbes stood behind its story, and Binance eventually dropped the suit. “The article’s inaccurate,” Zhao said in Dubai, though he added that the dispute didn’t factor into his decision to put up $200 million for a stake in the magazine, and that he won’t interfere with editorial matters. When asked what in the article was inaccurate, he said he wasn’t sure. Zhao hasn’t been to the US in years, which some take as an acknowledgment of the fear that he might be arrested. He said this isn’t the case; he’s only avoiding the country so as not to provoke a confrontation. “I think I’m totally allowed in the US, no problem,” he said. “But I don’t want to give the perception that we’re trying to solicit users there.” When he speaks at US conferences, he does so by Zoom.
Binance is now the subject of SEC probes into the possible sale of unregistered securities during the 2017 ICO and insider trading. It also faces questions from the agency about the relationship between the global exchange and the US arm. Todd White, managing partner of Rulon & White Governance Strategies, a Washington lobbying firm focused on cryptocurrencies, says these investigations are the result of Zhao’s failure to take compliance seriously. “They were just creating exchanges around the world,” White says. “I understand that you’re trying to build something, but anti-money-laundering rules are important.”
White says he urged Binance executives to take compliance more seriously in a 2018 meeting but was rebuffed. “They were very dismissive,” he says. “The amorphousness is a strategic choice. You can’t sue a cloud.” Binance disputes this account and says it takes compliance seriously.
Ironically for a company built on a skepticism of Wall Street, Binance is more centralized than even the biggest financial institutions. Today it is, simultaneously, an exchange, a brokerage, a savings bank, a venture capital investor, a data provider, and a “shitcoin casino” operator. It is, in other words, Nasdaq, Charles Schwab, Bank of America, Andreessen Horowitz, Morningstar, and Caesars Palace, all rolled into one. Zhao’s crypto organization “is vertically integrated in a way you’d never allow a traditional financial institution to be,” says Lex Sokolin, an economist at blockchain company ConSensys Software Inc.
Binance’s business model is, in short, rife with potential conflicts of interest. For example, given its size, a listing on its exchange typically sends the price of the coin soaring, and there have been spikes of trading activity just ahead of Binance listings, leading some critics to suspect insider trading. Jung, the Binance spokeswoman, says that employees are held to a “strict ethical code” that prohibits short-term trading. She says the company fires anyone found to have violated that policy.
The company is popular with crypto traders, but its history has included outages, withdrawal freezes, and at least one hack. Even as Binance and competing crypto exchanges mature, they continue to be run in ways counter to regulations designed to protect consumers, says John Reed Stark, former chief of the SEC Office of Internet Enforcement. “They’re just operating with absolutely no fiduciary infrastructure, no consumer protection, no oversight—just completely free to be you and me,” he says. “It’s not what you want when it comes to your finances.”
In Dubai, Zhao pointed out that many of the criticisms of Binance could just as easily apply to the company’s rivals. Numerous crypto exchanges have been charged with crimes or securities violations, and even well-established competitors have run into regulatory trouble. Sam Bankman-Fried, an FTX co-founder and Zhao rival, has used his wealth and media savvy to donate enormous sums to Democratic politicians and to recruit endorsements from Tom Brady, Gisele Bündchen, and Steph Curry, but FTX has also bounced among tax havens. (It’s currently based in the Bahamas.) Meanwhile, Coinbase, after taking a conservative approach in its early years, has since embraced shitcoins and now lists more than 100 tokens including Dogecoin and Shiba Inu—a Doge-like currency that’s somehow functioned both as a meta joke and a real investment opportunity amid the hype cycle. Coinbase’s website includes guides explaining, among other things, how to invest in a leveraged shitcoin index whose ticker symbol is “Bullshit.” (Binance has a similar guide.) Bullshit’s price has plunged 99.96% since last fall.
Zhao acknowledged some missteps on his company’s part and said he’s changed course over the past year. Previously, Binance tried to explain to regulators why a massive, unregulated crypto exchange was no biggie. But Zhao has come to realize, as he put it, that “we’re not going to educate them and change their minds on that. It’s easier for us to change than for them to change.”
Zhao has sought to hammer home this point by way of an influence campaign of sorts. The Forbes investment, through a proposed special purpose acquisition company, looks to have fallen apart as investors have soured on SPACs. But Binance has plowed tens of millions of dollars into high-profile soccer sponsorships (these included Argentina’s national club, Italy’s Lazio, and Brazil’s top-tier league) and pledged $500 million to back Elon Musk’s bid to take over Twitter. “We want to support free speech,” Zhao said of the Musk deal, though when asked how to square that decision with hiring Harder and suing Forbes, he equivocated. “Free speech is very hard to define,” he said. “I’ve never talked to Charles Harder. Our team handled it.”
As part of Zhao’s new adult-in-the-room phase, he’s been on a media kick. His publicists had suggested he’d give Businessweek a glimpse of his human side, perhaps a tour of his favorite parts of his new hometown. But Zhao seems to have few discernible interests outside of work, and the tour was downgraded to a 10-minute drive from one hotel to another in Zhao’s minivan, a black Toyota Granvia.
“People recommended a Rolls Royce or a Bentley, but none of those cars have the seats that go flat,” Zhao said, pressing a button and lowering himself into the knees of one of the two handlers who sat in the third row. “That was my only requirement.” It was apparent, as we drove, that if he had a favorite thing about Dubai, it wasn’t the indoor skiing or the ultramodern architecture—it was the accommodating regulatory climate. It’s hard to give a tour of that.
There were other signs that Zhao’s pivot to conventionality might not be entirely urgent. The day of the interview, Zhao said a reporter could visit the new Dubai office. But after a flurry of emails, calls, and texts, during which assistants and PR consultants made an array of excuses, a Binance representative said that in fact the office was closed because of a surge in Covid-19 cases. That was odd: Zhao had made no reference to the disease during the interview, nor had anyone else at the company. The previous day, Binance had arranged a separate interview with the company’s head of Middle Eastern operations, who showed up unmasked at a crowded hotel lobby where he appeared to be conducting in-person meetings.
Ten days later, Binance’s head of publicity offered Businessweek a virtual tour led by a member of the HR team, Peng Pheng Tan. Before the tour, Binance had explained that the offices weren’t exactly bustling but gave the impression that there was at least some activity in them. “So, we have offices,” Zhao had said, “but people only go to the offices a couple of days a week.” Tan conveyed something similar as she stepped into an elevator in a building near the Dubai World Trade Centre, livestreaming the view from her phone. “We’re doing a hot-desk system,” she said.
Then she passed through a set of blue doors. Inside was an expansive space with an amazing view of central Dubai. There were bare concrete floors, exposed ducts, drywall—and nothing else. There was an awkward pause. “Nobody is coming here,” she said. Another pause. “Yeah, basically.”
Zhao and the rest of the Binance executive team, meanwhile, were on the move again. He flew to France the day after the interview to attend the Cannes Film Festival (Binance was hosting a pizza giveaway during the event) and then it was on to Paris for the summer. He’d been enjoying a run of success in Europe, where Binance Italy recently received regulatory approval along with Binance France. Lately, Zhao had been talking up the possibility that Paris might serve as another home base.
The following month, Zhao tweeted that unlike other crypto companies, which were laying off employees amid the slowdown, Binance was “hiring for 2000 open positions.” He tweeted a picture of himself extending a hand to an imaginary hire inside what appeared to be a bustling office. It was inviting, if not exactly authentic. The office is identical to one found on Shutterstock, a free stock image website. Zhao’s head had been photoshopped onto a model’s body. Binance’s Jung says the tweet was “part of a meta joke,” as if Zhao were doing his own Shiba Inu bit. The tweet received more than 50,000 likes.