This is an AI translation from the original Chinese version.
Editor’s Note:
He is a mysterious Chinese billionaire without a fixed office, navigating between the realms of reality and the virtual world. He has countless followers and often gathers foes. Some call him sincere and kind, while others label him as a villain.
Once living under the shadows of power and money, he was suppressed by giants; later, he became the master of power, capable of reducing a Silicon Valley darling company valued at several tens of billions of dollars to ashes within three days. At this moment, CZ is awaiting the arrival of his trial.
He is expected to be sentenced on April 30th, with the prosecution seeking a 36-month prison term for him. CZ has waived his right to appeal.
In November of last year, CZ and his company reached a plea agreement with the U.S. Department of Justice, admitting to charges of money laundering, sanctions violations, and agreeing to a $4.3 billion penalty. Simultaneously, CZ stepped down as CEO and paid a personal fine of $50 million.
The question before the world is how to judge his tumultuous life story, his stirring of madness and chaos.
By Chen Teng Edited by Zhou Jinyu
How to make the most money in the shortest time?
Most wealth myths pale in comparison to CZ. In 2017, as a grassroots entrepreneur, he made nearly $2 billion in just 180 days. Suddenly, he appeared as a cover figure on Forbes’ billionaire list. By 2022, at the age of 44, his wealth had reached $96 billion, making him the richest Chinese.
People are astonished, asking, who is CZ? They also wonder, where is CZ, a question even private detectives cannot answer. Sometimes, rumors claim CZ commutes to work in Singapore on a skateboard, but other times in Dubai. He boasts of having over 3,000 employees, yet no headquarters, not even a single office space.
On November 21, 2023, he finally emerged. In a courthouse in Seattle, USA, he signed a money laundering confession with a black pen, signed: Zhao Changpeng. He was compelled to resign as the CEO of Binance—the world’s largest cryptocurrency exchange he founded—and pay one of the highest corporate fines in U.S. history, $4.3 billion. This was even after significant reductions.
As for the sentencing discount, the U.S. Department of Justice, the Treasury Department, and the Commodity Futures Trading Commission still can’t agree: 10 years, or a few months? How to judge the chaos he stirred in this world? The sentence, originally set for the end of February 2024, has been postponed for an additional two months.
As he exited the courthouse, Zhao Changpeng’s drooping face bore the marks of exhaustion. It’s hard to imagine how the six-and-a-half years of tumult and frenzy in his life have come to such a conclusion.
The Genesis of the Story
The inception of this narrative did not start with him, but rather with an individual named Satoshi Nakamoto, whose nationality remains uncertain.
In 2008, amidst the global tremors of the financial crisis and the criticism aimed at financial institutions, Satoshi Nakamoto released a mere 9-page document—the Bitcoin Whitepaper—ushering in the birth of a new system.
Within the whitepaper, Nakamoto devised a method to eliminate financial and governmental institutions, establishing a peer-to-peer electronic payment system. Picture this: in a world devoid of banks, you could transfer money directly to another within minutes online, regardless of the amount, without fees, audits, currency restrictions, or national boundaries. Consider all the agonizing moments you’ve had yelling at bank tellers—those would vanish. All taboos surrounding money would be shattered. Furthermore, it ensured complete anonymity, grounded in encryption technology. For the first time in history, you became your own bank. This epitomized the concept of “decentralization.”
Within the system later renamed blockchain, Nakamoto invented a new form of currency. Bitcoin emerged in this groundbreaking fashion.
Upon creating Bitcoin, Nakamoto disappeared like a character from a fairy tale. Nearly all evidence of his existence boiled down to those 9 pages, alongside a message of absolute rationality and seething anger expressed on the first block of Bitcoin: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” While he paved the road to utopia, overnight fortunes were made, family legacies crumbled, billions were obliterated in an instant, and some found themselves incarcerated for decades. Yet, all of this seemed detached from him—Nakamoto was resolute in decentralizing even himself.
Early Years of CZ
Bitcoin, once of negligible value, transitioned to the point where 10,000 Bitcoins could buy two pizzas, escalating to over $200 per coin in 2013. In that very year, Zhao Changpeng, seated at a card table, heard about Bitcoin for the first time. Upon returning home, he printed out the whitepaper, meticulously studied it, and thus began the wheels of his fate turning. He sold his house in Shanghai, investing ¥6 million in Bitcoin. A year later, while the house in Shanghai doubled in value, Bitcoin plummeted by two-thirds.
Nevertheless, he persisted, with people labeling him as possessing unyielding gambler’s spirit. However, after gaining fame, his madness was interpreted as a form of faith. In that same year, Nakamoto ruthlessly dismantled centralized power with absolute rationality and calmness, a parallel seemingly drawn to Zhao Changpeng’s early years.
Born in 1977 in rural Jiangsu, Zhao Changpeng’s father, Zhao Shengkai, was a teacher at the University of Science and Technology of China. Originally destined for a respected household, his father was labeled a capitalist roader and subsequently sent to the countryside. In the formative first decade of his life, Zhao Changpeng grew up in the shadows, amidst the harsh, barren landscapes of rural life. As for what he truly endured during those years, he seems to have never openly discussed.
In 1989, his father embarked on a journey to Canada for a Ph.D. in geophysics, with Zhao Changpeng joining him as immigrants. They resided in housing designated for graduate students and faculty, while his mother engaged in some tailoring work. He noticed that his peers from elsewhere lived in affluent, spacious homes. Proud of being the volleyball team captain, he often found himself riding in the BMWs of his teammates’ families. In contrast, his father drove an old car. During high school, to supplement the household income, he worked at gas stations and made burgers at McDonald’s.
The sole luxury in their household was his father spending over CAD $7,000 (equivalent to tens of thousands of renminbi at the time) on a computer for research and teaching Zhao Changpeng how to code. His father would work fervently at the computer every day, delving into complex mathematical equations with dedication and humility, never amassing significant wealth. He advised Zhao Changpeng: “Secure a decent job and work hard.”
It was during this time that Zhao Changpeng read a book titled “Rich Dad Poor Dad,” which led him to question the advice of his “poor dad.” He aspired to establish his own company. Subsequently, Zhao Changpeng dropped out of computer science at McGill University and immersed himself in the Tokyo Stock Exchange before joining Bloomberg in New York, where he developed online trading system programs. In 2005, at the age of 28, he returned to the rapidly developing China, founding a company in Shanghai specializing in high-frequency trading systems for brokerage firms.
Creating efficient trading systems became a skill at which Zhao Changpeng excelled.
Takeoff
After hearing about Bitcoin in 2013, Zhao Changpeng gradually joined several cryptocurrency startups, overseeing trading technology. However, things did not proceed smoothly. On one occasion, a dispute with a partner escalated to the internet. The other party accused Zhao Changpeng of fraudulent behavior, while he countered that the other party was using bots to falsify trading volumes and mislead users. People likened the early days of the cryptocurrency sphere to the wild west of America, where deception and manipulation ran rampant. Complete anonymity and lack of oversight quickly turned virtual currencies into hotbeds for fraudulent activities.
Bitcoin became the primary currency of the dark web markets, used to purchase drugs, firearms, weapons of mass destruction, hacker services, assassination contracts, and other illicit goods most people would rather not contemplate. In 2011, an online black market surged, attracting 115,000 buyers and facilitating over 1.5 million transactions involving 9.5 million Bitcoins, amounting to a total value of $213 million. By the end of 2013, the website was shut down, its founder sentenced to life imprisonment without the possibility of parole.
Fueled by intense demand, by early 2017, the price of a single Bitcoin had soared to $1,000, and various cryptocurrencies sprouted up like mushrooms after rain.
It was discovered that by simply tweaking Satoshi Nakamoto’s entirely open-source code, anyone could create a new coin out of thin air. Whether in the thousands or billions, the quantity was at one’s discretion. If there was a way for this coin to circulate, then it would hold value. People’s imaginations of freedom were ignited, and freedom could be wild: some created Shiba Inu coin, Meme coin, Garlic coin, Jesus coin, One coin, Dark coin, and even a Harry Potter-Obama-Sonic-10-dog coin—hey! Please refrain from fixating on pronouncing this stitched-together name; the madness unleashed by humanity is beyond comprehension. Remember, its market value once exceeded $180 million. People, with nervous excitement, proclaimed this as the future of money, a once-in-a-lifetime opportunity for wealth accumulation. A mobile casino. Some refer to the cryptosphere in this manner. Others view it as elaborate scams. Yet, there are those who firmly believe that Bitcoin’s ethos of “decentralization” embodies human ideals.
Zhao Changpeng decided to venture into entrepreneurship, stating, “This is a once-in-a-lifetime opportunity.” However, the company he chose to establish was a centralized exchange. Centralization signified that the founder naturally wielded unlimited power: controlling all assets deposited by users (sometimes reaching astronomical figures), all resulting data, and possessing absolute authority over transactions. Similar to a bank, yet scarcely regulated.
In 2014, the world’s largest Bitcoin exchange, Mt. Gox, collapsed—an exchange playfully dubbed by locals as the “Tokyo Kiosk Exchange.” It, too, was a centralized exchange, having once accounted for over 70% of global Bitcoin transactions. The website claimed it went offline due to a hacker theft of Bitcoins, with the CEO Mark Karpeles suspected of embezzlement, resulting in the loss of 750,000 customer-owned Bitcoins. This epitome of top-tier deceitful conduct eventually became one of the most infamous events in the cryptosphere.
Hence, Zhao Changpeng decided to christen his new company “Binance”—hoping to conjure feelings of security, tranquility among the populace. On July 14, 2017, the Binance platform officially went live.
Initially, chaos reigned. Just 60 days after the launch, authorities issued a statement forbidding the initial coin offering (ICO), implying that Binance had to fully reimburse investors with the funds raised for the startup. According to Zhao Changpeng’s recollection, although Binance Coin had surged sixfold, the ban caused four other ICOs he held to plummet drastically. To fulfill the original investment, Binance had to provide the $6 million shortfall. He remarked, “During that time, Binance was not profitable and was burning through money. The cost of recruitment and development was substantial.” He mentioned that he was on a train at that moment, and the team briefed him over the phone for a few minutes; it was in those minutes that he decided to reimburse.
These almost calamitous actions under duress garnered widespread trust and praise for Binance, with a multitude of users flocking to the platform. Within a month, Binance had attracted 120,000 users and began turning profitable. Over the years, Zhao Changpeng would repeatedly cite the critical $6 million incident. He stated that the experience taught Binance a vital lesson: take care of your users, and they will take care of the company. Subsequently, several similar “taking care of users” events occurred in Binance’s history. Zhao Changpeng seemed to handle the power entrusted to him by users humbly and with caution.
In the cryptosphere, a realm teeming with “exploited investors,” fraudsters, speculators, daydreaming enthusiasts, and overnight wealth-seekers, these actions appeared remarkably valuable. People felt that Binance truly lived up to its name.
Not only that, Binance promoted its trading system as being 100 to 1000 times faster than competitors, with trading fees ten times lower. During the cryptocurrency boom of 2017, Binance pivoted towards coin-to-coin trading, rather than transactions between fiat currencies and Bitcoin. At the time, regulations included shutting down crypto asset exchanges. Sensing the wind shifting, Zhao Changpeng decided to relocate Binance to Tokyo, Japan. He started expanding overseas operations and swiftly increased the number of supported languages from 2 to 9.
In summary, when cryptocurrency exchanges faced severe setbacks, Binance persevered. Staff members told Zhao Changpeng, “You possess immense mental strength, you are the most Stoic person I have ever seen.” The Stoic school of philosophy originated in ancient Greece around 300 BC, advising people to follow the guidance of reason and break free from the control of emotions. Zhao Changpeng replied, “Is that so? I’m just trying to solve problems in the most logical, efficient, and effective manner and remain as calm as possible.”
Five months after going live, Binance attracted 6 million users with its efficient performance, spanning over 180 countries, and exceeded $3 billion in daily trading volume. Subsequently, Binance became the world’s largest cryptocurrency exchange—originally aiming to achieve this in three years. Zhao Changpeng remarked, “Sometimes you are very fortunate.” Six months later, with daily trading volumes surpassing $10 billion, Zhao Changpeng suddenly graced the cover of Forbes as a cryptocurrency billionaire with a wealth ranging from $1.1 to 2 billion, titled, “From Zero to Billionaire in 6 Months”.
Conflict
The clash between Binance and the traditional world quickly came to the fore. Just a month after its inception, Sequoia Capital, a major player in Internet investments, keenly approached Binance, signing an intention to invest. At that time, Sequoia valued Binance at $80 million and decided to purchase a stake of 11%. However, in the rapidly evolving crypto world, traditional Sequoia’s valuation of Binance quickly became outdated. Within a mere four months, another venture capital firm, IDG, had escalated Binance’s valuation to $400 million and $1 billion in two separate rounds. Zhao Changpeng notified Sequoia that their valuation was undervalued.
Within days, Sequoia unilaterally sought an injunction from the court, prohibiting Binance from negotiating with other investors, alleging a breach of an exclusivity agreement. Zhao Changpeng explained that they were discussing Series A investment with Sequoia and Series B investment with IDG.
Initially, the injunction was granted. However, the court later deemed Sequoia’s actions as an abuse of process. This resulted in Binance being unable to engage in negotiations with other investors during this period. Ultimately, IDG also did not invest in Binance. In the rapidly changing crypto sphere, Binance incurred significant opportunity costs. Zhao Changpeng later recalled, “It was a critical time in the market; other venture capitalists and investors were highly interested in Binance. This dispute made it challenging for me to focus on the company’s operation.”
When facing giant centralized investment entities, startups often appear vulnerable. To wage this legal battle, Zhao Changpeng preemptively spent approximately $780,000 on legal fees, a substantial cost for many startups; embroiled in a lawsuit, he found it difficult to secure further financing. In such circumstances, many startups have no choice but to concede to the unequal terms set by venture capitalists.
For a considerable period, Zhao Changpeng seemed unable to let go of the past suppression by Sequoia. In May 2018, a court in Hong Kong ruled in favor of Binance. Zhao Changpeng stated, “We may soon require all projects seeking listing on Binance to disclose any direct or indirect association with Sequoia Capital. We are not just on the defensive.”
Upon this announcement, projects related to Sequoia—such as FIL Futures—dropped by 4.21%, and the enterprise-level blockchain application platform IOST fell by 7.17%.
This is also the taste of power.
Following the publicized victory, Zhao Changpeng remarked, “Fortunately, for today’s entrepreneurs, there are alternative options available. Welcome to using blockchain-based fundraising activities.” Moreover, according to Zhao Changpeng’s claims, Binance itself was built on assets equivalent to $15 million raised from the public.
The Wandering Earth
For Zhao Changpeng, the allure of decentralization extended beyond this realm.
After the regulations of 2017, Binance relocated its servers and staff from China to Japan. Within just six months, Japan issued an eviction notice, prompting Binance to traverse half the globe to Malta, a small nation in the Mediterranean. However, the serenity was short-lived. Soon, Binance’s name became entangled with various countries, regions, and cities such as Uganda, Bermuda, Dubai, Singapore, and the United Kingdom. Zhao Changpeng found himself engaging with individuals of varied backgrounds—negotiating, socializing, and clarifying amidst a chaos of good and bad news. At one point, in an attempt to adapt to local culture, he even donned a suit with shorts for negotiations. However, this nomadic journey ultimately ended in despair: Binance struggled to secure a headquarters address. People wanted the benefits of cryptocurrency—swift, unencumbered finances—yet struggled with global, anonymous circulation. Who was Zhao Changpeng, devoid of any established background? Who would dare grant him a legitimate operational license?
Damn it all.
“I sit anywhere, and that is Binance’s office,” Zhao Changpeng declared. Henceforth, one of Binance’s trademarks was Zhao Changpeng’s advocacy of decentralized offices: with over 3,000 employees scattered globally, not a single headquarters in sight; they hailed from all corners of the world, dispersed across the globe.
It sounds cool, but the undeniable truth remains: no country could easily reign in Binance. Lawyers struggled even to send legal notices to Zhao Changpeng, as he had no fixed address. Slowly but surely, no one knew Zhao Changpeng’s exact whereabouts. Nevertheless, it’s also plausible that Binance maintained the secrecy of its headquarters. His only recurring presence was on Twitter. Like his rapid accumulation of wealth, he now stood as a super influencer with 9 million followers, frequently addressing the world via the megaphone.
Binance thrived in this pirate-like state, where the rule was—there are no rules.
Internally, he set a target: allowing users to complete transactions within 10 minutes. Therefore, new users hardly needed to provide any information to start trading. In contrast to traditional financial institutions, where you are required to fill out forms when opening a bank account, known as the “Know Your Customer” (KYC) process, early Binance operations did not necessitate such procedures; anonymous accounts were permissible.
This enabled a significant influx and outflow of undisclosed funds on Binance, offering a quick 10-minute laundering opportunity.
Users on Binance hailed from all corners of the globe, with some originating from countries and regions on the high-risk list designated by the U.S. Department of the Treasury. The influx of dubious funds could be linked to activities involving drugs, terrorism, child exploitation, and more.
In disclosed records, Zhao Changpeng once stated, “Rather than seek permission, it is better to seek forgiveness.” He regarded compliance as a “grey area.” At one point, a compliance officer at Binance wrote, “We need a banner that reads, ‘Laundering money for drugs is too hard nowadays—come to Binance, we’ve got you covered.'”
In May 2021, Bloomberg released a report indicating that Binance was facing money laundering and tax evasion investigations from the United States. By August 2021, Binance began demanding KYC information from customers. However, until October 2022, Binance allowed customers to trade on the platform through third-party intermediaries without providing KYC information.
Almost concurrently, in 2021, Binance reached its zenith. In 2022, according to the Bloomberg Billionaires Index, Zhao Changpeng ascended to the top of the list of the wealthiest Chinese individuals with a net worth of $94 billion. Simultaneously, Binance boasted 1.2 billion users, processing $650 billion worth of transactions daily, capturing 50% of the crypto market.
Swiftly vanishing, beyond comparison.
He stated, “Binance’s mission is to facilitate the free flow of value, and cryptocurrencies have already brought this freedom to millions of people and will benefit billions in the future.”
Yet, evading regulations made Zhao Changpeng increasingly enigmatic. Sometimes people claimed he was in Singapore or Dubai. During meetings, a green screen was erected behind him to obscure the background. Internal communications within his company frequently changed contact methods, employing messages that vanished after reading. He instructed employees not to discuss work in public, even if intoxicated.
Rivalry
As Zhao Changpeng stood atop life’s pinnacle, confronting increasingly stringent regulations, a young man suddenly emerged.
In May 2019, an American named Sam Bankman-Fried founded FTX, a centralized exchange. However, this figure, dubbed “Fry Bros” in the Chinese community, chose a path starkly different from Zhao Changpeng from the outset—actively embracing regulation and emphasizing compliance.
From the very onset, Fry Bros appeared as an ideal leader. Born in 1992, both of his parents were lifelong professors at Stanford Law School, and his aunt was the inaugural dean of Columbia University’s School of Public Health. He himself graduated from MIT with a degree in Physics. His mother mentioned that Fry Bros exhibited mathematical genius from a young age: tutoring classmates before exams, organizing a math competition involving hundreds of participants in high school, and even being a part of the question-setting team. Upon graduation, he smoothly entered a quantitative trading firm on Wall Street. From his origins, he effortlessly overshadowed grassroots Zhao Changpeng in every aspect.
In contrast to the buzz-cut Zhao Changpeng, Fry Bros sported an explosive hairstyle, exuding a unique personality. In 2021, during his pitch to Sequoia Capital (yes, the entity that had had enough of Zhao Changpeng and sought the next cryptocurrency titan investment opportunity), Fry Bros was seen persuading Sequoia to invest in his company while engrossed in his favorite game, “League of Legends.”
At the end of the meeting, Sequoia inquired, “What is your long-term vision for FTX?” Fry Bros narrated a tale about a super app: “I want FTX to become a place where you can do anything with your next dollar. Regardless of the currency you hold, you can send it to any friend worldwide. You can buy Bitcoin, you can buy a banana; through FTX, you can use your money for anything.” Sequoia noted in their report: This is the future of money, with a potential market that can reach anyone worldwide.
They also discovered that Fry Bros had been an effective utilitarian since his Wall Street days—earn a substantial sum and then donate it. According to Fry Bros’ mother, since middle school, he systematically and holistically contemplated moral responsibility, spending hours locked in his room reading vast amounts of material on effective altruism. One day, at the age of 12, he suddenly opened his door and posed a moral philosophical question to his mother, so profound that even a professor from Stanford Law School found it too deep: individuals who make a living pondering these questions can hardly reach this level.
As his contemplation deepened in high school, he relinquished his penchant for steak and fries, becoming a vegetarian at 18, eventually evolving into an extreme vegan. During his tenure on Wall Street, he donated half of his salary. All these actions Fry Bros quietly undertook, with his mother learning of them from friends. She described her child as indifferent to his own happiness—a form of grand nobility—but to his parents, a profound sorrow.
Sequoia wrote: FTX’s competitive advantage lies in ethical conduct. They titled their enthusiastic report: Sam has a savior complex, perhaps you should too.
Fry Bros always drove a dilapidated Toyota, clad in loose, distorted T-shirts and shorts. He professed disinterest in yachts, luxury goods, and the like. He conducted himself with humility, friendliness, and approachability, often sleeping on the soft sofa in the office’s common area. When visitors arrived, employees were to wake him at the scheduled time, and he would groggily meet them.
You see, this is a genius with ideals, capabilities, and character—a person the world sorely needs.
Between 2021 and 2022, Fry Bros secured $1.72 billion in funding for FTX from investors like Sequoia Capital and SoftBank, propelling its valuation from $18 billion to $32 billion within six months. Fry Bros referred to FTX as “Silicon Valley’s treasure.”
He had no intentions to hide like Zhao Changpeng. In 2020, he donated $5.2 million to Biden’s U.S. presidential campaign, ranking second among individual donors. From September 2020 to November 2022, he donated nearly $80 million to Biden’s political campaigns and committees. Once Biden took office, he signed an executive order and comprehensive framework “Ensuring Responsible Development of Digital Assets.” In 2021, Fry Bros hired a member of the U.S. Commodity Futures Trading Commission (CFTC).
These moves allowed Fry Bros entry into the U.S. Congress. As legislative policies were being drafted in Congress, hearings were held to gather and analyze opinions from various sectors. Fry Bros successfully attended as a representative of cryptocurrency. At the hearing, he stated, “Cryptocurrencies have the potential to improve people’s lives,” expressing willingness to voluntarily accept regulation. These substantial actions positioned Fry Bros as a voice capable of influencing cryptocurrency regulation in politics; he referred to himself as the “crypto savior.”
Simultaneously, Fry Bros engaged in grandiose self-promotion. He spent $135 million renaming the NBA Miami Heat arena to FTX Arena; $210 million to rename the largest U.S. esports organization TSM to TSM FTX; $6.5 million on a Super Bowl ad for 2022, featuring the famous sitcom “Seinfeld” creator Larry David. FTX’s endorsements included American football player Tom Brady, supermodel Gisele Bündchen, and numerous YouTube influencers.
In 2021, FTX’s trading volume was 26 times that of 2019, with an average daily volume of $10 billion. While its volume was only one-third of Binance’s during that year, it quickly rose to become the world’s second-largest cryptocurrency exchange. By 2022, Fry Bros’ net worth was estimated at $26.5 billion. Apart from Facebook’s Zuckerberg, nobody had amassed such wealth at the age of 30. Sequoia even asked Fry Bros, “Am I speaking to the future world’s first trillionaire?”
Hailing from political elites, Ivy League academia, and Wall Street blue blood—this is how people describe Fry Bros; how about Zhao Changpeng? In comparison, he seems like an unremarkable boss: he became familiar with Bitcoin through a card game; he sold his Shanghai house, investing the entirety in Bitcoin, a move some deemed as a strong gamble; he founded Binance due to sensing “a trending wave coming”; his humble origins and Chinese face hindered him from navigating Washington’s elite political circles like Fry Bros; his past lacks the traces of genius or charisma—he even had public spats with collaborating partners, resulting in mutual losses; regulators viewed him as too free-spirited and mysteriously elusive, akin to a wandering thunderbolt.
As Fry Bros maneuvered within Washington’s political circles, he taunted Zhao Changpeng: “I can freely enter and exit Washington; can Zhao Changpeng?” Zhao Changpeng publicly hinted that Fry Bros had once sought regulatory action against Binance. He sarcastically remarked about Fry Bros: “The Wall Street Journal actually called Sam the savior of the crypto world (with ‘laugh to death’ emojis).” However, the original Wall Street Journal article stated, “Sam calls himself a savior,” and Zhao Changpeng tweeted an excerpt out of context.
One day, Zhao Changpeng came across a seemingly inconspicuous news piece revealing the balance sheet of an FTX affiliate. Subsequently, on November 6, 2022, with over 8 million followers, Zhao Changpeng tweeted: “We will divest all FTX (tokens created by FTX) on our books.” This tweet caused FTX to plummet by 84% within a week. On November 9, in an unexpected turn of events, the once-mocked Zhao Changpeng received a call from Fry Bros, who requested to buy FTX. Initially agreeing, Zhao Changpeng reneged the next day, tweeting: “After thorough due diligence, we have decided not to acquire FTX.”
People began frenziedly selling FTX, only to discover that the assets within FTX were inadequate for withdrawal. Just two days later, on November 11, FTX filed for bankruptcy, and Fry Bros resigned from the position of CEO. On December 12, Fry Bros was arrested, toppling the idolized figure in the crypto circle, with the FTX case becoming one of the largest financial fraud cases in U.S. history.
A tale of Fall and Fire
In the aftermath of bankruptcy, the renowned American restructuring lawyer John J. Ray III took the reins, a figure who had navigated the largest bankruptcy case in American history with energy trading firm Enron, facilitating an $800 million return to creditors. When assuming control of FTX, he remarked, “I have never witnessed such a complete failure in corporate governance or such profound absence of financial credit information before. FTX had inadequately maintained proper bookkeeping and had not secured its digital assets. The company was run by a small group of inexperienced youths.” Surprisingly, even interpersonal engagements transpired between them. Fry Bros once cautioned investors not to interfere with his company’s operations, indicating a clear ultimatum: either accept my terms or depart. Investors, convinced of Fry Bros’ genius, allowed him to proceed with his methods unquestioned.
At this juncture, people began to inquire: What had transpired?
Primarily, the issue stemmed from centralized exchanges: Fry Bros had misappropriated substantial assets deposited by customers into FTX, diverting them towards political donations, luxury real estate acquisitions, and speculative ventures. Ray stated that Fry Bros personally misappropriated over $10 billion from clients. Zhao Changpeng mocked, “Thought he was running a bank.”
Following the bankruptcy, amidst media scrutiny, the fallen Fry Bros renounced the persona he had meticulously crafted, dismissing it as mere public relations rhetoric. He stated, “The greatest heroes of the last decade will never be recognized by many. The most beloved are often the most duplicitous. All the nonsense I’ve spouted wasn’t real. Morality, that foolish game, is what we sober Westerners play. I have to conform too. People only appreciate us when we eloquently preach the ‘right’ doctrines.” To his employees, he once remarked, “My seeming madness is crucial for investors.” According to cryptocurrency media outlet Coindesk, Fry Bros persistently emphasized his charitable acts, dubbing it as one of the most effective whitewashing events in recent history, manipulating public perception through the propagation of his ostensible acts of effective altruism.
Amidst the ripple effect of the bankruptcy, digital currency exchanges like BlockFI and Genesis Global successively filed for bankruptcy. Noteworthy investors in FTX like Sequoia Capital, SoftBank, Ontario Teachers’ Pension Plan, Temasek Holdings, and Tiger Global Fund, faced staggering losses, with investors and creditors collectively losing $3 billion. Approximately 4.2% of Singapore’s population felt the impact. Zhao Changpeng remarked, “The cryptocurrency realm has undergone a purification, albeit a painful process.” According to CryptoCompare, in December 2022, following FTX’s collapse, Binance’s market share surged from 48.7% at the beginning of the year to 66.7%.
On the 11th day post-FTX’s announcement of bankruptcy, Zhao Changpeng replicated a similar strategy against Coinbase, a competitor holding roughly 10% market share. This time, he dug up an article from four months prior, casting doubt on Coinbase’s Bitcoin reserve data, insinuating potential misappropriation of depositor funds. Coinbase’s CEO promptly retorted, “We are a publicly listed company, all financial data is transparent, and one can refer to our third-quarter financial report. Beware of misinformation.” Since its inception in 2012, Coinbase had been known in the industry as the “straight shooter” among a wilderness of players. Zhao Changpeng, perhaps forgetting to peruse his rival’s financials, promptly deleted his tweet.
Consequently, speculations arose: Zhao Changpeng was portrayed as a schemer and a villain, prioritizing the expansion of his own empire while displaying indifference towards others in the industry. Those impacted by FTX’s losses directed their ire towards Zhao Changpeng. The $8 billion deficiency in user funds potentially affected an estimated one million users. Some individuals had entrusted their lifelong savings to FTX, leading to shattered livelihoods, plunging family members into depression, and even prompting suicidal tendencies. Faced with the backlash, Zhao Changpeng stated, “If you consider fraud acceptable, then you’re probably already destitute.” A commenter retorted, “Even if that is true, coming from you, it sounds quite callous.”
As Fry Bros faced arrest and a potential maximum sentence of 115 years, Zhao Changpeng’s attacks against him showed no signs of abating. The overwhelming tide of animosity left Zhao Changpeng perplexed. On Twitter, he repeatedly emphasized Fry Bros’ fraudulent nature. At times, he reasoned that his actions were based on industry transparency principles and not targeted at anyone in particular. Occasionally, he mused, “Data shows that Fry Bros’ girlfriend’s tweets were the actual trigger for the ensuing sell-off.”
During this turmoil, Vitalik Buterin, co-founder of the world’s second-largest blockchain Ethereum and known as “V God” in the Chinese community, voiced, “Sam Bankman-Fried, as a public figure, is receiving his just deserts. But Sam, as a person, deserves love. I hope his friends and family can provide him with the care he now requires.”
In a surprising turn, among the numerous tweets from Zhao Changpeng, Fry Bros, and Vitalik, only Vitalik’s tweets repeatedly emphasized one word on various occasions: compassion. Zhao Changpeng’s count stood at 0, as did Fry Bros’. Despite Vitalik’s widespread adoration and even being seen as endearing while picking his nose, a commenter astutely remarked, “Your misplaced compassion is a bewildering misstep. Who truly needs more compassion at this juncture?”
The entire industry weathered significant shocks, ushering cryptocurrency back into another ice age.
In the face of power, can restraint be attainable? Zhao Changpeng and Binance come under scrutiny. When one wields immense authority, can control over that power ever be absolute? For Sequoia, FTX, and Coinbase, they likely have never comprehended the concept of restraint wielded by the Twitter superpower Zhao Changpeng.
Ensnared in Flames
Scarce half a month following the downfall of the Washington magnate, regulatory bodies from various nations set their sights on Zhao Changpeng, determined to erode his power. Coinciding with these events, Binance consistently featured in the news alongside regulatory forces: The Singapore Police Force initiated a financial crime inquiry into Binance—undergoing a monumental paradigm shift in their stance toward Zhao Changpeng; officials from the Dubai Virtual Asset Regulatory Agency pressed Binance for increased disclosure concerning its ownership structure, governance, and auditing procedures; prompted by regulatory policy shifts, Binance voluntarily withdrew from the Canadian market, ceasing services to Canadian users.
In March 2023, the U.S. Commodity Futures Trading Commission (CFTC) sued Zhao Changpeng and his company, citing multiple violations of the Commodity Exchange Act and CFTC regulations. During early negotiations, the legal team had suggested his resignation as Binance’s CEO in exchange for lenient judgements. Zhao Changpeng adamantly refused to relinquish control over Binance, leading to the chief legal advisor’s eventual resignation due to irreconcilable differences. Eventually, Zhao Changpeng had to come to terms with the fact that his stepping down would inflict minimal harm upon Binance.
The elusive Zhao Changpeng ultimately emerged from seclusion. He flew to the United States, signed a confession, paid fines, and resigned. Under the agreement, U.S. authorities permitted Binance to continue operations, albeit with access granted for a five-year period to scrutinize Binance’s books, records, and systems; Binance was prohibited from catering to U.S. customers going forward; Zhao Changpeng himself was banned from participating in Binance’s management for three years.
Notably, opinions surfaced deeming Zhao Changpeng as the sacrificial lamb in a financial charade. The immeasurable price paid by Binance sparked contemplation on the lengths individuals are willing to go for freedom since some issues simply cannot be settled with money.
In June 2023, the U.S. Securities and Exchange Commission (SEC) sued Binance and Zhao Changpeng, outlining 13 charges in a voluminous 136-page indictment, including critical allegations such as mishandling client funds. In the ensuing protracted months, leading up to the present day, the SEC persisted in its legal tussle with Binance, relentlessly scrutinizing for the ultimate smoking gun of “misappropriating user funds,” maintaining a persistent grip on the company. This legal battle nearly led to the demise of Binance’s U.S. division, resulting in a two-thirds reduction in staff and a 75% drop in revenue. The SEC’s chairman, previously linked to Fry Bros in contentious ties, aimed to secure jurisdiction over virtual currencies through the act of suing Binance.
For an extended period, U.S. financial regulatory bodies struggled to determine the appropriate course of action concerning cryptocurrencies. Should they fall under the jurisdiction of the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC)? Uncertainty permeated their decision-making processes, grappling with the characterization of cryptocurrencies—were they akin to stocks, bonds, commodities, or raw materials like agricultural produce? The two agencies even engaged in heated contention over the regulatory rights governing cryptocurrencies.
Nonetheless, as millions globally held digital assets by 2023 with cryptocurrency market capitalization hitting $3 trillion in 2021, regulation candidly struggled to keep pace with the populace’s pursuit of “freedom.”
Regardless, the U.S. government gradually awakened to the reality, opting to take a stance: rather than regulating cryptocurrencies, they leaned towards regulating exchanges.
Regret
Unfortunately, by the time they began to decipher how to regulate centralized exchanges, people had already started flocking towards decentralized exchanges. Perhaps, in the wake of FTX’s collapse, there was a loss of faith in the ability of human nature to handle immense power, or maybe the belief that exercising restraint over power necessitates extraordinary character. People were reexamining the path set by Satoshi Nakamoto: utilizing pure technology to diffuse power.
Zhao Changpeng remarked, “Decentralization is a trend; sometimes, you can feel the current while you are in the water.” Yet, in comparison to reflections on power, he appeared more concerned with freedom. He once stated, “I am not the ultimate advocate of blockchain technology, but I am an advocate of ultimate freedom, committed to providing financial freedom for everyone.” In the days awaiting his sentence, Zhao Changpeng mentioned finally having time to explore decentralized finance, a gray area where regulatory authorities have yet to catch up.
As for his former adversary, Fry Bros. On the 28th of March, 2024, the 32-year-old Sam stood trial in New York, maintaining his innocence, and was handed a 25-year sentence by the judge. Prior to Christmas last year, a journalist visited Fry Bros in prison. The journalist described Fry Bros as emaciated in prison, with a distaste for bathing. However, Fry Bros brought his amiable side into the prison: he assisted his fellow inmates with legal defenses and prepared them for job exams. The inmates found him peculiar but deemed him a good-hearted individual. During the interview process, there were even shouts among the inmates, “Free Sam!”
Following the collapse of FTX, Fry Bros revealed his true self to his mother for the first time: “In my life, I have never felt happiness, nor do I believe I am capable of feeling it.” During sentencing, the judge remarked that Fry Bros had never expressed a hint of remorse for his crimes, describing him as a math genius adept at calculation, driven by a pursuit of power and influence. Fry Bros decided to appeal. Nevertheless, even though his time in prison might be lengthy, Fry Bros probably wouldn’t endure undue hardships.
As for Zhao Changpeng, who is soon to face incarceration, his prison relationships are more uncertain. Following the signing of a confession, he wrote on Twitter, “An employee told me once, people sometimes misinterpret you, thinking that business is everything to you. But there are also some simple things that people don’t see. Like a few days before these events happened, you asked me to send a wedding gift to a junior employee.”
Once, when discussing his father, Zhao Changpeng mentioned, “My father spent his days in his laboratory and in front of his computer, never once attending any of my volleyball matches. I was the team captain back then, playing several matches every week, but my parents never witnessed a single one.” Reflecting on his father’s focus on work and neglect of other matters, Zhao Changpeng acknowledged, “I have also inherited this trait.”
In an article that addressed his father’s absence from his volleyball games, it was noted that a tinge of regret permeated Zhao Changpeng’s demeanor.