Heroes to zeroes in 12 months: How the two biggest crypto billionaire CEOs proved the critics right
Combination showing Former FTX CEO, Sam Bankman-Fried (L) and Zhao Changpeng (R), founder and chief executive officer of Binance.
Getty Images | Reuters
After a brutal 18 months of bankruptcies, company failures and criminal trials, the crypto market is starting to claw back some of its former standing.
Bitcoin is up more than 150% this year. Meanwhile, Solana is nearly 10x higher in the last 12 months, and bitcoin miner Marathon Digital has also skyrocketed. Crypto-pegged stocks like Coinbase, MicroStrategy and the Grayscale Bitcoin Trust rose more than 300% in value year-to-date.
But even as prices swell, the sector’s reputation has struggled to regain ground after names virtually synonymous with bitcoin have both been found guilty of crimes directly related to their multibillion-dollar crypto empires.
For years, Binance’s Changpeng Zhao and FTX’s Sam Bankman-Fried preached the power of decentralized, digital currencies to the masses. Both were bitcoin billionaires who ran their own global cryptocurrency exchanges and spent much of their professional career selling the public on a new, tech-powered world order; one where an alternative financial system comprised of borderless virtual coins would liberate the oppressed by eliminating middlemen like banks and the over-reach of the government.
Yet they both, in the end, helped crypto critics and regulators make the case that some of them had been right all along; that the industry was rife with grifters and fraudsters intent on using new tech to carry out age-old crimes.
Even when the crypto market was at its hottest, as token prices hit all-time highs in Oct. 2021, some of the biggest names in business and politics shared their doubts.
JPMorgan Chase CEO Jamie Dimon said in 2021 at peak crypto valuations that bitcoin was “worthless,” and he doubled down on that sentiment earlier this year when he said that the digital currency was a “hyped-up fraud.” Microsoft co-founder Bill Gates said in 2018 that he would short bitcoin if he could, adding that cryptocurrencies are “kind of a pure ‘greater fool theory’ type of investment.” Legendary investor Warren Buffett said he wouldn’t buy all of the bitcoin in the world for $25, because “it doesn’t produce anything,” and Senator Elizabeth Warren (D-Mass.) has long been one of crypto’s greatest naysayers on Capitol Hill.
Rather than ushering in a new era of financial freedom, Zhao and Bankman-Fried were found guilty on a mix of charges including fraud and money laundering. Once the two biggest names in crypto, the sector’s greatest proponents now face jail time.
Bankman-Fried, 31, could be sentenced to life in prison after being convicted of seven criminal counts in early November, including charges related to stealing billions of dollars from FTX’s customers. Less than three weeks after Bankman-Fried’s conviction, Zhao pleaded guilty to criminal charges and stepped down as Binance’s CEO as part of a $4.3 billion settlement with the Department of Justice.
Their crimes varied, but ultimately, both crypto execs went from industry titans to convicted frauds in the span of 12 months, and it was, in part, the bitter feud between them that landed them there.
“They were both responsible for behavior that has kept a black eye on crypto and its association with criminal behavior,” said Renato Mariotti, a former prosecutor in the U.S. Justice Department’s Securities and Commodities Fraud Section.
The early days
Zhao and Bankman-Fried were friends at first, before they became one another’s chief rival.
CZ, as Zhao is also known, had been first to the space. After a stint as the chief technology officer of a centralized crypto exchange called OKCoin, he launched a spot exchange of his own in 2017 called Binance, which has since become the largest cryptocurrency trading platform in the world, by volume.
That same year, Bankman-Fried earned street cred in crypto circles for his bitcoin arbitrage trading strategy, dubbed the Kimchi swap.
While the price of bitcoin today is relatively standard across the world’s exchanges, six years ago, the price differential would sometimes vary by more than 50%. This kind of arbitrage-based strategy, though relatively straightforward, wasn’t the easiest thing to execute on crypto rails back then, since it involved setting up connections to each one of the trading platforms.
To scale the operation, Bankman-Fried launched his own quantitative crypto hedge fund, Alameda Research. But what really put him on the map, according to Bankman-Fried, was CZ himself.
Just after Bankman-Fried moved his business to Hong Kong at the end of 2018, he met CZ for the first time after contributing $150,000 to co-sponsor a Binance conference in Singapore. One of the perks of that donation was a slot onstage with the Binance chief.
According to author Michael Lewis, whose book profiling Bankman-Fried was published the day the former FTX CEO’s criminal trial began in October, Bankman-Fried said this appearance is what gave him “legitimacy in crypto.”
The pair, according to Lewis’s reporting, were nothing alike in business or in personal dealings.
“Sam was gunning to build an exchange for big institutional crypto traders; CZ was all about pitching to retail and the little guy,” Lewis wrote, adding, “Sam hated conflict and so was almost weirdly quick to forget grievances; CZ thrived on conflict and nurtured the emotions that led to it.”
The relationship between Zhao and Bankman-Fried began to sour a few months after they met.
In March 2019, CZ passed on paying Bankman-Fried $40 million to buy the futures crypto exchange that SBF had designed with his team, instead building a version of the same platform in-house. A month later, Bankman-Fried and a few others founded FTX.com, a first-of-its-kind futures trading exchange with a flashy new liquidation engine and features which catered to large-scale institutional clients. Binance was the first outside investor in FTX, funding a Series A round in 2019. As part of that arrangement, Binance took on a long-term position in FTX’s native token, FTT, which was created to give perks to customers.
FTX’s success begat a $2 billion venture fund that seeded other crypto firms. Bankman-Fried’s personal wealth grew to around $26 billion at its peak, and FTX reached a valuation of $32 billion before it all came crashing down.
As crypto prices ran up in 2021, Bankman-Fried’s reputation did the same. Suddenly, the wunderkind was praised by the press as the poster boy for crypto everywhere.
The FTX logo adorned everything from Formula One race cars to a Miami basketball arena. Bankman-Fried went on an endless press tour, bragged about having a balance sheet that could one day buy Goldman Sachs, and became a fixture in Washington, where he was one of the Democratic Party’s top donors, promising to sink $1 billion into U.S. political races before later backtracking. Bankman-Fried wielded some of that political influence to cast shade on Zhao and Binance’s dealing.
At the same time, CZ’s influence continued to grow, as did Binance’s market dominance. With assets of more than $65 billion on the platform, it processed billions of dollars in trading volume every year.
As the two grew to be formidable opponents, FTX opted to buy out Binance in 2021 with a combination of FTT and other coins, according to Zhao.
But much of Bankman-Fried’s empire was a mirage, while Zhao’s operation was laced with questionable business tactics under the hood. What ultimately exposed the grift at the two exchanges was the rivalry between the crypto bosses.
Battle of the titans rocks crypto
As crypto prices tanked in 2022 and a cascade of bankruptcies rocked confidence in the sector, Bankman-Fried boasted that he and his enterprise were immune. But in fact, the industry-wide wipeout hit his operation quite hard.
Alameda borrowed money to invest in failing digital asset firms in the spring and summer of 2022 to keep the industry afloat, then reportedly siphoned off FTX customers’ deposits to stave off margin calls and meet immediate debt obligations.
In Nov. 2022, a fight between Bankman-Fried and CZ on Twitter, now known as X, pulled the mask off the scheme.
Zhao dropped the hammer with a tweet saying that because of “recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books.”
The threat led to a panic-led sell-off of the FTT token. As the price of the coin plummeted by over 75%, so too did confidence in the platform. FTX executives scrambled to contain the damage, but customers proceeded to pull billions of dollars off the exchange. Zhao, who swooped in and agreed to buy FTX in a fire sale, backed out of the deal after one day’s worth of due diligence, and the company spiraled into bankruptcy.
As outsiders got a look at FTX’s actual books for the first time, the fraud became clear: Bankman-Fried and other leaders at FTX had taken billions of dollars in customer money.
In fact, during the criminal trial of Bankman-Fried, both the prosecution and defense agreed that $10 billion in customer money that was sitting in FTX’s crypto exchange went missing, with some of it going toward payments for real estate, recalled loans, venture investments and political donations. They also agreed that Bankman-Fried was the one calling the shots.
The key question for jurors was one of intent: Did Bankman-Fried knowingly commit fraud in directing those payouts with FTX customer cash, or did he simply make some mistakes along the way? Jurors decided within a few hours of deliberation that he had knowingly committed fraud on a mass scale.
The government’s beef with Zhao and Binance was different.
Three criminal charges were brought against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy. Binance has agreed to forfeit $2.5 billion to the government, as well as to pay a fine of $1.8 billion, for crimes which included allowing illicit actors to make more than 100,000 transactions that supported activities such as terrorism and illegal narcotics.
U.S. Attorney General Merrick Garland said in a press conference on Nov. 21 that the fine is “one of the largest penalties we have ever obtained.”
“Using new technology to break the law does not make you a disruptor; it makes you a criminal,” Garland said.
The $4.3 billion settlement and plea arrangement with the U.S. government, including the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department, resolves a multiyear investigation into the world’s largest cryptocurrency exchange. The Securities and Exchange Commission, however, was notably absent.
Zhao and others were also charged with violating the Bank Secrecy Act by failing to implement an effective anti-money-laundering program and for willfully violating U.S. economic sanctions “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law,” according to the Justice Department. The DOJ is recommending that the court impose a $50 million fine on Zhao.
In the meantime, CZ has been released on a $175 million personal recognizance bond secured by $15 million in cash and has a sentencing hearing scheduled for Feb. 23. Bankman-Fried faces a sentencing hearing on March 28.
Indicted FTX founder Sam Bankman-Fried leaves the U.S. Courthouse in New York City, July 26, 2023.
Amr Alfiky | Reuters
Winning the war
Legal experts tell CNBC that one critical distinction in the case of Zhao versus Bankman-Fried is the success of their respective enterprises.
“One key difference between CZ and SBF that should not be underestimated is that CZ ran a company that remains highly profitable and solvent,” said Mariotti. He added, “Binance has a war chest that it could use to pay hefty fines and provide leverage that gave the DOJ and CFTC a reason to settle.”
Binance will continue to operate but with new ground rules, per the settlement. The company will be required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money-laundering standards. The company is also required to appoint an independent compliance monitor.
FTX, on the other hand, remains in bankruptcy court in Delaware as it looks to claw back cash in an attempt to make the exchange’s former investors and customers whole.
“Several factors may play into the outcome of CZ and why his guilty plea may have him spending minimal, if not any, time in prison versus SBF’s likely lengthy, if not life, sentence behind bars,” Braden Perry, who was once a senior trial lawyer for the CFTC, FTX’s only official U.S. regulator, told CNBC.
Perry said that the connection with foreign crime, including money laundering and breaching international financial sanctions, was key to Binance’s undoing. There was, however, no pursuit of criminal fraud of its customers’ money — a key distinction from the case of Bankman-Fried.
Another thing in Zhao’s corner: his willingness to cooperate with the government.
Any time the Justice Department pursues a criminal prosecution or the SEC brings a civil enforcement action against a defendant, they will consider the cooperation of the defendant, according to Richard Levin, a partner at Nelson Mullins Riley & Scarborough, where he chairs the fintech and regulation practice.
While CZ faces considerably less time in prison, Mariotti points out that despite the Binance founder’s significant fortune, he will still take a financial hit from the U.S. government.
“In the end, neither CZ nor SBF won,” said Mariotti, adding, “Leaders within the crypto community have seen what can happen, and perhaps the fall of these crypto ‘titans’ will signal smoother times ahead. But the continued lack of regulatory clarity and regulation through enforcement has not helped those looking for guidance on crypto compliance.”
Even as the dust settles, some of the companies still standing have struggled to stay afloat after venture capital dollars sought safer shores in startups geared toward generative artificial intelligence.
But a turnaround in token prices and crypto-pegged stocks has begun to buoy investor sentiment.
Traders are also increasingly bullish that the SEC will begin approving applications for a new spot bitcoin ETF, launched by leaders in traditional finance, by the first quarter of 2024. This type of exchange-traded fund would allow investors to buy into digital currency directly, through the same mechanism they already used to buy stock and bond ETFs.
Top asset managers, including BlackRock, WisdomTree and Invesco have all filed applications. A note from Bernstein says that, if approved, this will be the “largest pipe ever built between traditional financial markets and crypto financial markets.”
Global renewable developer and energy giant RWE has halted its US offshore wind operations “for the time being” because of the “political environment” the Trump administration has created.
RWE, Germany’s biggest electricity producer, said in March that it had dialed back its US offshore wind activities. But now, CEO Marcus Krebber said in a speech transcript, which he’ll deliver at the company’s Annual General Meeting in Essen on April 30, that its US offshore wind business is now closed (but it wasn’t all bad news):
In the US, where we have stopped our offshore activities for the time being, our business in onshore wind, solar energy, and battery storage has so far been developing very dynamically. At the start of this year, we reached an important milestone when our US generation capacity hit the 10 gigawatt mark. The construction of a further 4 gigawatts is secured.
He went on to say that renewables have created regional value and jobs, but that the company remains “cautious given the political developments.” RWE has introduced more stringent requirements for future US investments:
All necessary federal permits must be in place. Tax credits must be safe harbored and all relevant tariff risks mitigated. In addition, onshore wind and solar projects must have secured offtake at the time of the investment decision. Only if these conditions are met will further investments be possible, given the political environment.
About half of RWE’s installed renewable capacity is in the US, where it’s the third-largest renewable energy company through its subsidiary, RWE Clean Energy. RWE holds the rights to develop US offshore wind projects in New York, Louisiana, and California.
RWE paid $1.1 billion for the New York lease area in 2022, where it’s meant to develop the 3 gigawatt (GW) Community Offshore Wind with the UK’s National Grid. Community Offshore Wind was projected to come online in the early 2030s and expected to power more than a million homes.
The developer paid $5.6 billion for the Louisiana lease in the Gulf of Mexico in 2023 as the lone bidder for development rights, and the Canopy Offshore Wind project off Northern California was not expected to be completed for another decade.
Read more: Trump admin halts $5 billion NY offshore wind project mid-build
Now is a great time to begin your solar journey so your system is installed in time for those longer sunny days. If you want to make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. They have hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20 to 30% compared to going it alone. Plus, it’s free to use and you won’t get sales calls until you select an installer and share your phone number with them.
Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisors to help you every step of the way. Get started here. –trusted affiliate partner
FTC: We use income earning auto affiliate links. More.
It’s that time of year again, time for events across the country to show off electric vehicles at Drive Electric Earth Month.
Drive Electric Earth Month is an offshoot of Drive Electric Week, a long-running annual tradition hosting meetups mostly in the US, but also occasionally in other countries. It started as Drive Electric Earth Day, but since not every event can happen on the same day, they went ahead and extended it to encompass “Earth Month” events that happen across the month of April. It’s all organized by Plug In America, the Sierra Club, the Electric Vehicle Association, EV Hybrid Noire, and Drive Electric USA.
Events consist of general Earth Day-style community celebrations, EV Ride & Drives where you can test drive several EVs in one place, and opportunities to talk to EV owners and ask them questions about what it’s like to live with an EV, away from the pressure of a dealership.
This month, there are 158 events registered across the US and 1 in Mexico (including one online webinar about things to consider when purchasing an EV).
Events have been happening all month, but the biggest weekend is this upcoming one, APril 26-27.
One really neat event was the Asheville event, which showcased the resiliency of EVs in an area devastated by Hurricane Helene, which was made more severe by climate change. That event was attended by the Rivian R1T which famously got dragged 100 feet submerged in mud and came out running fine.
But the bulk of the events happened on the weekends surrounding Earth Day, April 22, so there were several last weekend and will be even more this upcoming weekend.
There are plenty of events in the big cities where you’d expect, but Plug In America wanted to highlight a few of the events in smaller places around the country. Here’s a sampling of upcoming events:
- Big Island EV – Cruise and Picnic in Waimea, HI on April 26, 10am-1pm – EV drivers will congregate in various places around the Big Island (Kona, Waimea, Waikoloa and Hilo), then drive up Saddle Road to the Gil Kahele Recreation Area on Mauna Kea for a potluck and a chance to talk about the experience of owning EVs on the Big Island.
- Santa Barbara Earth Day 2025 and Green Car Show in Santa Barbara, CA on April 26-27, 11am-8pm – This is part of Santa Barbara’s Earth Day celebration, which routinely attracts 30,000 participants and is one of the longest-running Earth Day celebrations on the planet. The Green Car Show includes ride & drives and an “Owners Corner” where owners can showcase their EVs and attendees can check them out and ask questions.
- Earth Day’25 – EV’s role in a sustainable future in Queretaro City, Mexico on April 26, 9am-4pm – The sole Mexican event, this is a combined in-person/online seminar at the Querétaro Institute of Technology.
- Norman Earth Day Festival in Norman, OK on April 27, 12-5pm – Another municipal Earth Day festival, with hands-on activities for kids to learn about the environment. A portion of the parking lot reserved for an EV car show for EV owners who pre-register to show off their vehicles.
- Oregon Electric Vehicle Association Test Drive & Information Expo in Portland, OR on April 27, 10am-4pm – This one is at Daimler Truck’s North American HQ, and will have several EVs for test drives, owner displays (including DIY gas-to-EV conversions), and keynote presentations by EV experts. They’ll even have a 1914 Detroit Electric EV available for test rides!
- And, we at Electrek want to give a shoutout to Rove’s EV Drive Days in Santa Ana 10am-3pm April 28 – ROVE is the company behind the “full-service” EV charging concept that we’ve talked about several times here on Electrek, and we like what they’re doing for EV charging. They’ve hosted a few community events, and this is their contribution to Earth Month.
Each event has a different assortment of activities (e.g. test drives won’t be available at every event, generally just the larger ones attended by local dealerships), so be sure to check the events page to see what the plan is for your local event.
These events have offered a great way to connect with owners and see the newest electric vehicle tech, and even get a chance to do test rides and drives in person. Attendees got to hear unfiltered information from actual owners about the benefits and trials of owning EVs, allowing for longer and more genuine (and often more knowledgeable) conversations than one might normally encounter at a dealership.
And if you’re an owner – you can show off your car and answer those questions for interested onlookers.
To view all the events and see what’s happening in your area, you can check out the list of events or the events map. You can also sign up to volunteer at your local events, and if you plan to show off your electric car, you can RSVP on each event page and list the vehicle that you plan to show (or see what other vehicles have already registered).
Charge your electric vehicle at home using rooftop solar panels. Find a reliable and competitively priced solar installer near you on EnergySage, for free. They have pre-vetted installers competing for your business, ensuring high-quality solutions and 20-30% savings. It’s free, with no sales calls until you choose an installer. Compare personalized solar quotes online and receive guidance from unbiased Energy Advisers. Get started here. – ad*
FTC: We use income earning auto affiliate links. More.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway