Federal losses and investigations .. ‘Binance’ billionaire faces winter of Dubai’s cryptocurrencies

Bloomberg Agency has highlighted the richest man in the cryptocurrency world, Changpeng Zhao, who is the founder of the Dubai-based decentralized asset trading platform Binance.

During the early months of this year, Binance promoted a new, low-risk way of investing and encouraged its clients to buy a “stablecoin” called “tera usd”.

And that cryptocurrency works something like a savings account, with it always worth $ 1. Binance told customers who used its service to buy, sell and invest in various cryptocurrencies that this particular stablecoin offers something special: the promise of nearly 20 percent annual returns.

Binance suggested to customers that TerraUSD could be “safe” and “high-yield” in some way. Later, it turned out that the “TerraUSD” currency was not safe or high-yield.

Critics say the currency was a Ponzi scheme at the start of the crash that caused bitcoin prices to fall and caused companies across the industry to hastily lay off employees and freeze customer withdrawals.

Bitcoin is down nearly 70 percent from its peak in November and has sent the industry into a downturn in a severe crypto-winter, which is shocking news for investors.

On May 16, Binance CEO Changpeng Zhao revealed the magnitude of losses associated with his company’s stablecoin TerraUSDT. The company’s stake was $ 1.6 billion, but is now close to zero. Not that Zhao responded or issued any warnings. “I do not care much about money,” he said in an interview that day.

Last January, Zhao – Zhao was one of the ten richest people in the world at least on paper. Now its net worth has dropped along with the price of bitcoin and dropped from $ 96 billion to $ 11 billion, according to the Bloomberg Billionaires Index. However, Binance remains the largest company in the cryptocurrency space.

Zhao is a Chinese-born Canadian who emigrated to Vancouver at the age of 12 and graduated with a degree in computer science from McGill University in Montreal. The 45-year-old has traveled the world throughout his life and has rarely stayed anywhere. for more than a few years.

Between successes and setbacks

In his early twenties, he wrote a symbol for the Tokyo Stock Exchange. Then came an assignment in New York at Bloomberg. He later moved to Shanghai, where he co-founded a company that developed software for high-frequency traders before founding Binance in 2017.

But the Chinese government banned cryptocurrency exchanges during the same year. “I lived on two suitcases,” he said, “actually a big suitcase and a small suitcase.” In Dubai, he finally felt at home, because he bought an apartment, moved his belongings and rented an office. as part of a new phase for Binance.

He noted that at the age of 45, he was at least ten years older than most crypto-entrepreneurs, and he boasted of a close relationship with the UAE government.

He said cryptocurrency is a much healthier investment than critics have realized and Binance will be the company to prove it.

“We have 120 million users who trust us for their life savings. We protect our users and we communicate with governments and regulators,” he continued.

Critics have warned for years about possible vulnerabilities that could allow criminals and money launderers to move money through digital exchanges. In June, Reuters reported that Binance had been used to launder at least $ 2.35 billion, including money from dark-web drug markets, North Korean burglary groups and ordinary fraudsters.

Binance denies this, saying the allegations are misleading and point to the existence of a 120-person security team that includes former senior law enforcement officials from the US, UK and Europe.

The platform allows anyone to open an account from almost anywhere in the world with just basic personal details and an email address without anything proving their identity, according to Bloomberg.

Nowadays, users with unverified accounts can do little, but for years they were allowed to withdraw up to $ 120,000 bitcoins per day before the policy change in 2021. The company lowered the limit to 0.06 bitcoins, or about $ 1,200 per day. current prices.

“We were probably one of the first companies to grow simultaneously in 180 countries,” says Zhao now. “We had users everywhere. We had teams everywhere.”

Binance has always presented itself as a decentralized company. Legally, its trademark is owned by a Cayman Islands company called “Binance Holdings”.

Zhao is the sole owner of BVI-registered Binance Capital Management, which bought the crypto-data website CoinMarketCap for $ 400 million.

Many of Binance’s operations located in other countries such as Malta, Singapore, Ireland, France and Italy are also wholly owned by Zhao, either directly or through an entity that controls it, according to the companies’ entries.

Binance will remain an unregulated exchange, but the company will also create regulated local exchanges where users can buy cryptocurrencies with dollars or other national currencies.

Binance called on governments in Japan, Malta and Singapore, all of which eventually moved to prevent it from opening, while regulators elsewhere – including the Netherlands, South Africa, Thailand and even the Cayman Islands – warned not to allow the exchange does not function locally.

Zhao described those failures as setbacks and was part of a process to “look across multiple sites to try to find out which one would be more suitable for cryptocurrencies.”

In the United States, Binance is facing investigations by the U.S. Securities and Exchange Commission into a possible sale of unregistered securities during the launch of the exchange’s “GDP” currency in 2017, and its circulation within the country. The company also faces questions from the federal agency about the relationship between the global exchange and the US arm of the platform.

Zhao has not been to the United States for years, which some see as an acknowledgment of fear that he may be arrested, but he has denied it.

He said he avoided visiting the United States so as not to provoke confrontation, adding: “I think I am completely allowed to enter the United States. No problem. But I do not want to give the perception that we’re trying to lure users there. “

Todd White, managing partner at Rollin & White Government Strategies, a lobbying firm in Washington that focuses on cryptocurrency, said these investigations are a result of Zhao’s failure to take compliance seriously.

“They were just creating exchanges all over the world,” White added. “I understand you’re trying to build something, but anti-money laundering rules are important.”

However, Chow has enjoyed some success in Europe, where Binance Italia recently received regulatory approval along with Binance France.

Zhao tweeted that unlike other crypto companies, which lay off employees amid the slowdown in markets, Binance “had 2,000 vacancies”.

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