It pays its people in a digital token of its own devising. It’s based wherever its founder happens to be. A growing list of countries want no part of it. And Binance Holdings Ltd. might just be the biggest, craziest thing in the big, crazy realm of cryptocurrencies.
Welcome to the world of Changpeng Zhao, the elusive, flip-flop-wearing software developer everyone calls CZ—and the brains behind Binance. For now, it’s the largest cryptocurrency exchange on the planet, even though the U.K. just booted an affiliate and Thailand filed a criminal complaint against the firm for operating without a license.
Founded in China, banished to Japan and later self-exiled to Malta, Binance today is officially domiciled in the Cayman Islands and, unofficially, headquartered precisely nowhere. The platform lives on the internet and so far has seemed to elude regulators’ attempts to pinpoint exactly how it operates and where. At its heart is CZ, a crypto cult figure with about 3 million Twitter followers and a stated desire to minimize government oversight. Lately, he’s been living in Singapore.
Only now, authorities in several countries want to know more about CZ’s four-year-old experiment in crypto-commerce. The U.K. rebuke is one of the biggest blows so far: Binance Markets Ltd. can’t offer products or even advertise—a move that prompted Barclays Plc to block debit-card payments to the exchange.
The U.S. Justice Department and the Internal Revenue Service were already investigating whether Binance is a conduit for money laundering and tax evasion. The Commodity Futures Trading Commission is probing whether Binance let Americans place wagers that violated U.S. regulations. Germany’s financial regulator said it’s concerned the firm broke rules by selling tokenized shares of Tesla Inc. and other companies.
Binance told Bloomberg it’s committed to following the rules and strives to be a partner to watchdogs in routing out misconduct, a message the firm has delivered consistently.
Wild West
The scrutiny shows that in the Wild West of crypto—make that the Wild East, North and South, too—getting a handle on Binance presents myriad challenges. Last year, a federal judge dismissed a lawsuit filed by a Binance contractor in Portland, Oregon, because the young company has neither offices nor managers in the states. The court ruled that it lacked jurisdiction.
The case was one for our meme-filled, cryptodenominated times. CZ acolytes refer to themselves as Binancians, and like all good Binancians, Steve Reynolds had been paid not in dollars, euro or yen but in BNB, the company’s crypto token. After Reynolds fell out with Binance, he alleged CZ threatened to hurt him financially. Then, when Reynolds checked his Binance account—empty. Some $300,000 worth of BNB had been spirited out, he claimed.
“CZ personally stole money from me,” Reynolds said in an interview, reiterating allegations he made in his lawsuit. “There are people who have worked for Binance who believed and got screwed.”
Binance denied it did anything wrong. Its lawyer, Roberto Gonzalez, a former Obama administration official, suggested during a hearing that the company had good reason to seize Reynolds’s funds, without offering specific details. Binance has used jurisdiction arguments in other litigation—thus far, keeping adversaries from probing internal company records for any signs of ties within the U.S.
CZ conceded in a July 6 blog post that Binance hasn’t “always got everything right, but we are learning and improving every day.” He added that cryptocurrencies need more regulation, so that more people feel safe participating in the market. He declined to be interviewed for this story.
Thriving Ecosystem
With Bitcoin’s meteoric rise, Binance has attracted legions of day traders eager to spend hours on computer screens swapping tokens. It’s also arguably the dream of Libertarian-leaning crypto enthusiasts and the nightmare of the Federal Reserve and other central banks: A thriving financial ecosystem where governments can’t control the printing of money or easily monitor transactions, including for possible crimes. Binance operates everything from digital wallets to its own blockchain that lets people build crypto trading apps to a popular cryptocurrency tracking website, which listed the BNB token as the fourth-biggest digital coin in the world last week after it surged a whopping 1,700% over the past year.
Those who’ve crossed paths with CZ say he inspires something close to a religious-like following among adherents. They also say he’s determined to avoid government red tape that could slow Binance’s momentum, according to interviews with more than a dozen people who are familiar with the firm’s operations. Most asked not to be named so they could speak candidly.
When the company faces criticism, CZ often takes to social media, labeling news articles FUD—an acronym for fear, uncertainty and doubt that’s the equivalent of tagging something fake news. During one March chat with fans on the Clubhouse social media platform, he said competitors have at times bribed journalists to write “bad things about Binance.”
“We take our legal obligations very seriously,” Binance said in its emailed statement to Bloomberg. “Our company is less than four years old and is evolving. We are proud of the compliance steps we’ve taken in this short period and look forward to building more robust structures in the months and years to come.”
For a self-professed crypto billionaire, CZ doesn’t show it. The 44-year-old typically wears t-shirts and shorts but upgrades to Binance-branded apparel when appearing at crypto events or doing television interviews. He grew up in China’s Jiangsu province, with his family moving to Vancouver when he was a teen. After studying computer science at Montreal’s McGill University, one of his first jobs was working for a trading platform at Bloomberg LP, the parent of Bloomberg News.
Binance’s Rise
By 2014, CZ was the chief technical officer of OKCoin, then China’s biggest Bitcoin exchange. He helped launch an overseas trading platform with features that would later become hallmarks of Binance: It was easy to use and offered customers lots of tokens to buy and sell. The platform also undercut rivals through lower transaction fees and freebies for Chinese residents.
In June 2017, CZ founded Binance, surrounding himself with an inner circle of Ivy League-educated lawyers and bankers who were eager for the chance to make fortunes by getting in on the ground floor of a startup. The firm’s rise was fast, fueled by Binance letting clients open an account with nothing more than an email address. No identification was required.