Original title: "World's Biggest Crypto Fortune Began With a Friendly Poker Game"
Author: Tom Maloney & Yueqi Yang & Ben Bartenstein

Compilation of the original text: Gu Yu, Chain Catcher

The Abu Dhabi Grand Prix attracts princes, movie stars and world-renowned athletes to party every year on Yas Island, an entertainment hub about 30 minutes from the city centre.

They were joined last month by a character who charted an unlikely ascent: a former McDonald's clerk and software developer who rose to the ranks of the world's richest man almost overnight — —Cryptocurrency pioneer Changpeng Zhao.

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Changpeng Zhao Photographer: Ore Huiying/The New York Times/Redux

In a region known for dizzying wealth, Changpeng Zhao, 44, fits the bill: He has a net worth of $96 billion, according to the Bloomberg Billionaires Index. It was Bloomberg's first estimate of his wealth, surpassing Asia's richest man, Mukesh Ambani, and tech titans including Zuckerberg and Google founders Larry Page and Sergey Brin.

Changpeng Zhao's actual wealth is likely to be much greater, as the wealth estimate does not take into account his personal crypto assets, which include Bitcoin and his company's own tokens. The so-called BNB surged roughly 1,300% last year.

Binance's success underscores the vast wealth created in the untethered world of cryptocurrencies, even as controversy has swirled around the company, even with a recent dip.

The company was expelled from China, where it originated, and faces investigations by global regulators. The U.S. Justice Department and Internal Revenue Service are investigating whether Binance Holdings Ltd., an entity controlled by Changpeng Zhao, was a conduit for money laundering and tax evasion, according to people familiar with the matter. Spokespeople for the Justice Department and the IRS declined to comment.

Binance's future may depend on its ability to settle with world regulators and find a popular location to set up its headquarters.

For now, though, money is pouring in.

Binance generated at least $20 billion in revenue last year, according to a Bloomberg analysis of its trading volume and fees. That's nearly three times the 2021 revenue of public company Coinbase.

"Coinbase may look like an 800-pound gorilla from a U.S. perspective, but Binance is much bigger," said DA Davidson & Co. analyst Chris Brendler.

crypto giant

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Source: Coingecko.com

Zhao declined to comment for this story, and Binance questioned the accuracy of Bloomberg’s estimates of the company’s market capitalization and its net worth.

"Cryptocurrencies are still in a growth phase," Binance said in a statement. "It's susceptible to higher levels of volatility. Any number you hear one day is going to be different than what you hear the next day."

A month before watching F1 stars Lewis Hamilton and Max Verstappen battle it out at the Yas Marina circuit, Changpeng Zhao, whose company he founded in 2017 has risen rapidly, spoke at the Bloomberg New Economics Forum in Singapore The numbers behind it spout out.

In a recent 24-hour period, Binance completed $170 billion in transactions. On a very slow day, it was about $40 billion -- up from $10 billion two years ago, he said.

In the crypto world, these are huge numbers. Binance typically facilitates as much trading volume as the other four major exchanges combined.

When Bloomberg's Erik Schatzker asked the billionaire about his wealth in a November interview in Singapore, Zhao demurred. "I don't care about wealth, money, rank," he said.

The slender cryptocurrency entrepreneur, who wears rimless glasses and a slightly oversized striped tie, added that such things would be a distraction and that he was prepared to give away almost all of his fortune before his death.

Whether Changpeng Zhao can hold on to his gains remains to be seen, and he has every reason to worry about his company's unbridled growth.

According to people familiar with the matter, in addition to the investigations of the Department of Justice and the Internal Revenue Service, the U.S. Commodity Futures Trading Commission is investigating Binance for possible market manipulation and insider trading, as well as whether it allows illegal U.S. customers to trade cryptocurrency derivatives. The Commodity Futures Trading Commission declined to comment.

Binance has also been the subject of consumer warnings in countries such as the U.K., Japan, and Germany. On Dec. 30, a Canadian securities regulator reprimanded the company for telling users of its trading platform that it could continue to operate in the country while still not registered.

A spokesperson for Binance said the company "is cooperating with regulators around the world, and we take our compliance obligations very seriously."

Changpeng Zhao says he welcomes — and wants — regulation.

"I'm not an anarchist," he said on a Bloomberg forum. "I don't believe that human civilization has advanced enough to live in a world without rules."

Wealth built on cryptocurrencies has surged as the value of digital tokens totaled $2.09 trillion on Jan. 7, up from $135 billion three years ago.

Until recently, cryptocurrency entrepreneurs rarely showed up in global wealth rankings. As more and more industry companies tap venture capital funding or public markets to make the value of these businesses more transparent, more and more companies are jumping on the bandwagon.

Trading platforms such as Coinbase, Gemini, FTX, and Kraken have achieved massive valuations in both public and private markets, while Binance's popularity among users and numerous products may be more attractive to investors.

However, the fortunes of cryptocurrencies are fluid. Bitcoin has fallen more than 8 percent this year to about $42,400, well off its early-November high of nearly $69,000. Shares of Coinbase have fallen about 35% over the past two months.

Some businesses have run afoul of regulators. BitMex is a cautionary tale, once the world's largest cryptocurrency derivatives trading platform.

In August, BitMex paid $100 million to settle charges with the CFTC and Financial Crimes Enforcement Network that it allowed illegal derivatives transactions and violated anti-money laundering laws. The company did not admit or deny the allegations. Founders Arthur Hayes, Samuel Reed and Ben Delo are awaiting trial after pleading not guilty in a separate Justice Department case accusing them of violating the Bank Secrecy Act.

crypto wealth

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Source: Bloomberg Billionaires Index

The Bloomberg Billionaires Index estimates Binance's 2021 revenue based on dollar-denominated spot and derivatives trading volumes published by industry research firms Coingecko and Nonomy, as well as publicly available trading fees. This calculation does not include the company’s other revenue streams, such as margin loans, technology, consulting and NFTs. Its valuation uses an enterprise value-to-sales multiple of listed peers. It assumes that Changpeng Zhao owns 90% of the company, based on his public statements and regulatory filings in jurisdictions requiring such disclosure.

Changpeng Zhao told Bloomberg in a November interview that Binance’s revenue is realized through hundreds of encrypted tokens, which the company does not convert into traditional currencies.

"We just grab them," he said. "If you do a number today, it's one number, and 5 minutes later it's a different number because every price is changing."

Changpeng Zhao was born in Jiangsu Province, China and is currently a Canadian citizen. His father, a university professor, moved the family to Vancouver when he was 12.

Changpeng Zhao was exposed to technology at a young age, later studied computer science, and eventually found finance jobs in Tokyo and New York, including four years at Bloomberg LP, the parent company of Bloomberg News.

His road to riches in crypto began with a friendly poker game in Shanghai in 2013 with then-BTC China CEO Bobby Lee and investor Ron Cao, who both encouraged him to put 10% of his net worth into Bitcoin.

After spending some time researching, he took the plunge and eventually sold his apartment for Bitcoin. In 2017, he founded Binance and it quickly grew into a cryptocurrency powerhouse. Changpeng Zhao even has the company logo tattooed on his arm.

Binance has become the go-to destination for trading “altcoins” — cryptocurrencies that are less liquid than more established tokens like bitcoin and ethereum, and have become some of the most speculative corners of the market. According to Coingecko, the company offers trading of more than 350 Tokens on its international trading platform, more than double the trading volume offered by Coinbase.

Tim Swanson, head of market intelligence at London-based blockchain firm Clearmatics, said Binance has succeeded in creating "user stickiness" in part by allowing customers to use BNB to lower transaction fees.

“They don’t even have to be the first to list a token, the liquidity can pool there,” Swanson said of Binance.

Zhao's company is also the largest provider of derivatives trading by volume, allowing users to speculate on cryptocurrencies with greater risk and potential reward.

Initially, Binance allowed customers to open accounts using only email addresses. It focuses on cryptocurrency transactions, limiting its interaction with traditional banks and their regulators. In August, the company announced that all new users would have to verify their identities, while existing users who did not have their identities verified would be restricted from withdrawing funds.

It never had an official headquarters. Founded in China, Binance has since traveled to Japan, and then to Malta, whose financial regulator has since denied oversight of the exchange. The company suffered a setback last month when its local unit withdrew an application to operate a trading platform in Singapore, despite having a significant presence there.

Now Binance is trying to secure a location, Changpeng Zhao said in a November interview, adding that an announcement about the headquarters would be made “in a very short time.”

That's the twist that happened in 2020, when Changpeng Zhao said the company's headquarters were wherever he happened to be. In legal filings, lawyers for the company said it was incorporated in the Cayman Islands, known as an offshore tax and regulatory haven.

Binance's ability to operate almost anywhere has made it difficult for regulators to establish jurisdiction over the company.

"Their approach is, 'We don't need regulators, we're decentralized,'" said DA Davidson analyst Brendler. "It's worked really well for growth and expansion, as well as product innovation."

Changpeng Zhao’s freewheeling approach may need to change as Binance seeks to raise capital from outside investors, who typically require some level of oversight to ensure the business is legally sound. Zhao Changpeng is being driven to find a supportive regulatory regime, according to people familiar with his discussions in the UAE.

Binance has been filled with senior positions by former employees of the UAE regulator and has signed an agreement with Dubai World Trade Center authorities to help develop a regulatory framework for crypto.

Not all of Binance’s efforts to curry favor with regulators have gone well.

Last year, Binance.US, a separately managed exchange business tied to the trading platform, hired a former U.S. acting comptroller of the currency as chief executive. His appointment was seen as a positive step in addressing regulatory concerns, but he lasted only three months, leaving in August after a disagreement over strategic direction.

Despite legal challenges, investors may want to take a chance on the world's most successful cryptocurrency trading platform. Late last year, Binance was looking to raise money from a sovereign wealth fund, and its U.S. subsidiary was also looking for investors with the goal of an initial public offering. In November, The Wall Street Journal reported that former executives estimated the company could be worth as much as $300 billion.

This will make Changpeng Zhao richer than both Musk, who is currently the world's richest man, and Bezos, whom Changpeng Zhao "admires".

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