Bloomberg released a feature on Zhao Changpeng: Assets exceed $96 billion, the path to wealth originated from a poker game

Authors: Tom Maloney, Yueqi Yang, Ben Bartenstein

Original Title: 《World's Biggest Crypto Fortune Began With a Friendly Poker Game》

Translation: Gu Yu, Chain Catcher

The Abu Dhabi Grand Prix attracts princes, movie stars, and world-renowned athletes every year to Yas Island, an entertainment hub about 30 minutes from downtown, for parties.

Last month, a figure joined their ranks, depicting an unlikely rise: a former McDonald's worker and software developer who almost overnight leaped into the ranks of the world's wealthiest—cryptocurrency pioneer Zhao Changpeng.

According to insiders, Zhao Changpeng is quickly becoming a regular in the United Arab Emirates, meeting with royal family members eager to bring his Binance exchange to the country. He purchased an apartment in Dubai and hosted dinners near the world's tallest building, the Burj Khalifa, and on the city's Palm Jumeirah—making him a prominent figure in the country's burgeoning cryptocurrency sector.

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

In a region known for its dazzling wealth, 44-year-old Zhao Changpeng fits right in: according to the Bloomberg Billionaires Index, his net worth is $96 billion. This is the first time Bloomberg has estimated his wealth, surpassing Asia's richest man Mukesh Ambani and tech giants including Zuckerberg and Google founders Larry Page and Sergey Brin.

Zhao Changpeng's actual wealth may be much larger, as wealth estimates do not account for his personal crypto assets, which include Bitcoin and his company's own tokens. The so-called BNB surged about 1,300% last year.

The success of Binance highlights the enormous wealth created in the unrestrained world of cryptocurrency, even amid recent declines, but controversy has surrounded the company.

The company was expelled from its birthplace in China and is facing investigations from global regulators. According to insiders, the U.S. Department of Justice and the IRS are investigating whether a company controlled by Zhao Changpeng, Binance Holdings Ltd., is a conduit for money laundering and tax evasion. Spokespersons for the U.S. Department of Justice and the IRS declined to comment.

Binance's future may depend on whether it can reconcile with global regulators and find a favorable location to establish its headquarters.

However, for now, funds are pouring in.

According to Bloomberg's analysis of its trading volume and fees, Binance generated at least $20 billion in revenue last year. This is nearly three times the revenue of publicly traded Coinbase in 2021.

DA Davidson & Co. analyst Chris Brendler stated, "From the U.S. perspective, Coinbase may look like an 800-pound gorilla, but Binance is much larger."

Crypto Giant

Binance is the largest cryptocurrency exchange by trading volume in both spot and derivatives markets.

Source: Coingecko.com

Zhao Changpeng declined to comment on the matter, and Binance questioned the accuracy of Bloomberg's estimates of the company's market value and his net worth.

"Cryptocurrency is still in a growth phase," Binance stated in a statement. "It is susceptible to higher levels of volatility. Any number you hear one day will be different from what you hear the next day."

A month before watching F1 stars Lewis Hamilton and Max Verstappen battle it out on the Yas Marina Circuit, Zhao Changpeng spoke at Bloomberg's New Economy Forum in Singapore, eloquently discussing the rapid rise of the company he founded in 2017.

In a recent 24-hour period, Binance completed $170 billion in trades. He said that on a very slow day, it was about $40 billion—compared to only $10 billion two years ago.

In the crypto world, these are enormous numbers. The trading volume Binance typically facilitates is as much as the total of the other four major exchanges combined.

When Bloomberg's Erik Schatzker asked the billionaire about his wealth during an interview in Singapore in November, Zhao objected. "I don't care about wealth, money, or rankings," he said.

The slender cryptocurrency entrepreneur, wearing frameless glasses and a slightly oversized striped tie, added that such things are distracting, and he is prepared to donate almost all of his wealth before he dies.

Whether Zhao Changpeng can hold onto his gains remains to be seen, as he has ample reason to be concerned about his company's reckless growth.

According to insiders, in addition to the investigations by the Department of Justice and the IRS, the Commodity Futures Trading Commission is investigating possible market manipulation and insider trading by Binance, as well as whether it allowed 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 UK, Japan, and Germany. On December 30, a Canadian securities regulator rebuked the company for telling users of its trading platform that it could continue operating in the country without being registered.

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

Zhao Changpeng said he welcomes—and hopes for—regulation.

"I'm not an anarchist," he said at the Bloomberg forum. "I don't believe that human civilization has developed to the point where we can live in a world without rules."

Wealth built on cryptocurrency has surged with the skyrocketing value of digital tokens, totaling $2.09 trillion on January 7, up from $135 billion three years ago.

Until recently, cryptocurrency entrepreneurs rarely appeared on global wealth rankings. As more companies in the industry utilize venture capital financing or public markets, making the valuations of these businesses more transparent, an increasing number of companies are entering this elite group.

Exchanges like Coinbase, Gemini, FTX, and Kraken have achieved massive valuations in public and private markets, while Binance's popularity among users and its multitude of products may be more attractive to investors.

However, the fate of cryptocurrency is unstable. Bitcoin has fallen over 8% this year to around $42,400, far below its peak of nearly $69,000 in early November. Coinbase's stock price has dropped about 35% in the past two months.

Some businesses have clashed with regulators. BitMex is a cautionary tale; it was once the largest cryptocurrency derivatives exchange in the world.

In August, BitMex paid $100 million to settle allegations with the CFTC and the Financial Crimes Enforcement Network regarding its facilitation of illegal derivatives trading and violations of 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 to separate charges brought by the Department of Justice for violating the Bank Secrecy Act.

Crypto Wealth

Zhao Changpeng is the richest cryptocurrency entrepreneur tracked by the Bloomberg Billionaires Index.

Source: Bloomberg Billionaires Index

The Bloomberg Billionaires Index estimates Binance's 2021 revenue based on spot and derivatives trading volumes denominated in U.S. dollars published by industry research firms Coingecko and Nonomy, as well as trading fees in the public domain. This calculation does not include other revenue sources for the company, such as margin loans, technology, consulting, and NFTs. Its valuation uses the enterprise value-to-sales multiples of publicly listed peers. Based on his public statements and regulatory filings in jurisdictions requiring disclosure of this information, it assumes Zhao Changpeng owns 90% of the company.

In a November interview with Bloomberg, Zhao Changpeng stated that Binance's revenue is generated through hundreds of cryptocurrency tokens, and the company does not convert them into traditional currency.

"We just hold onto them," he said. "If you calculate the number today, it's one number, and five minutes later it's a different number because every price is changing."

Zhao Changpeng was born in Jiangsu Province, China, and is now a Canadian citizen. His father was a university professor who was exiled to the countryside during the Cultural Revolution, and the family moved to Vancouver when he was 12.

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

His path to crypto wealth began in 2013 with a friendly poker game in Shanghai with then-BTC China CEO Bobby Lee and investor Ron Cao, both of whom encouraged him to invest 10% of his net worth in Bitcoin.

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

Binance has become the preferred destination for trading "altcoins"—cryptocurrencies with lower liquidity than more established tokens like Bitcoin and Ethereum—and has become one of the most speculative corners of the market. According to Coingecko, the company offers trading for over 350 tokens on its international exchange, more than twice the volume offered by Coinbase.

Tim Swanson, head of market intelligence at London-based blockchain company Clearmatics, stated that Binance has successfully created "user stickiness," partly by allowing customers to use BNB to reduce trading fees.

Swanson remarked about Binance, "They don't even have to be the first to list a token for liquidity to gather there."

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

Initially, Binance allowed customers to open accounts using only an email address. It focused on cryptocurrency trading, limiting interactions with traditional banks and their regulators. In August, the company announced that all new users must verify their identity, while existing users without verification would face withdrawal restrictions.

It has never had a formal headquarters. Binance was founded in China and subsequently moved to Japan, then Malta, where the financial regulator later denied oversight of the exchange. Although the company has significant operations in Singapore, its local division withdrew its application to operate an exchange in Singapore last month, facing setbacks.

Zhao Changpeng stated in a November interview that Binance is now trying to determine a location, adding that an announcement regarding headquarters will be made "very soon."

This pivot occurred in 2020, when Zhao Changpeng said the company's headquarters was wherever he happened to be. In legal documents, the company's lawyers stated that it is registered in the Cayman Islands, known for its 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 are decentralized,'" DA Davidson analyst Brendler said. "This has been very effective for growth, expansion, and product innovation."

As Binance seeks to raise funds from external investors, Zhao Changpeng's freewheeling approach may need to change, as these external investors typically require some degree of government oversight to ensure the business is legally sound. According to those familiar with his discussions in the UAE, Zhao Changpeng is being driven to seek a supportive regulatory framework.

Binance has been led by former employees of UAE regulatory agencies in senior positions and has signed an agreement with the Dubai World Trade Centre Authority to help develop a cryptocurrency regulatory framework.

Not all of Binance's efforts to appease regulators have gone smoothly.

Last year, the separately managed trading business Binance.US hired a former U.S. currency auditor as CEO. His appointment was seen as a positive step toward addressing regulatory issues, but he lasted only three months, leaving in August after a strategic direction disagreement.

Despite the legal challenges, investors may want to take a chance on the world's most successful cryptocurrency exchange. By the end of last year, Binance was seeking to raise funds from sovereign wealth funds, and its U.S. subsidiary was also looking for investors with an eye toward an initial public offering. In November, The Wall Street Journal reported that former executives estimated the company's value could reach $300 billion.

This would make Zhao Changpeng richer than the world's current richest man, Musk, and the second-richest, Bezos, whom Zhao Changpeng said he admires.

"I don't personally know him," Zhao Changpeng said in November when discussing the Amazon founder. "But I would love to connect with him in the future."