Crypto’s Richest Man Moves To Dubai As US Regulators Target Exchange

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Crypto's Richest Man Moves To Dubai As US Regulators Target Exchange

On May 16, CEO Chang­peng Zhao dis­closed the extent of Binances own Ter­ra-relat­ed losses.

Dur­ing the first few months of this year — back when buy­ing dig­i­tal tokens named after dog memes was still seen, at least in some of the most for­ward-think­ing cir­cles, as a per­fect­ly rea­son­able way to par­tic­i­pate in finance’s bright new future — the cryp­tocur­ren­cy exchange Binance pro­mot­ed a new, low-risk way to get in on the action. It urged its cus­tomers to invest in some­thing called Ter­raUSD. The token was what’s known in the trade as a “sta­ble­coin,” a type of cryp­tocur­ren­cy that func­tions a bit like a sav­ings account and promis­es to always be worth $1. Binance told cus­tomers who used its ser­vice to buy, sell, and invest in var­i­ous cryp­tocur­ren­cies that this par­tic­u­lar sta­ble­coin offered some­thing spe­cial: the promise of annu­al returns of almost 20%. Ter­raUSD, Binance sug­gest­ed to cus­tomers, could be some­how both “safe” and “high yield.”

As cryp­to enthu­si­asts know well, and as any­one accus­tomed to the nor­mal rules of finance can prob­a­bly guess, Ter­ra turned out to be nei­ther safe nor high yield. The coin was a Ponzi scheme, crit­ics say, the begin­ning of a col­lapse that sent Bit­coin prices plum­met­ing and caused com­pa­nies across the indus­try to hasti­ly lay off employ­ees and freeze cus­tomer with­drawals. Bit­coin is down near­ly 70% from its peak in Novem­ber, and the indus­try has named the down­turn the cryp­to winter.

This has been bad news for investors swept up in the fren­zy, as well as for Binance itself. On May 16, Chief Exec­u­tive Offi­cer Chang­peng Zhao dis­closed the extent of Binance’s own Ter­ra-relat­ed loss­es. The com­pa­ny’s stake had been worth $1.6 bil­lion but was now worth close to zero. Not that Zhao was heed­ing or issu­ing any warn­ings. “So, there’s a cou­ple of things about me,” he said in an inter­view that day. “I don’t real­ly care much about money.”

The com­ment, made as he sipped a $14 glass of orange juice at a French restau­rant in a Four Sea­sons hotel in Dubai, was hard to believe, com­ing as it did from the rich­est man in an indus­try that’s entire­ly about mon­ey. Zhao is slen­der and has a shaved head, soft voice, and wardrobe that seems to con­sist exclu­sive­ly of black Binance shirts. He’s also some­thing of a cipher. Depend­ing on who’s talk­ing, he’s either a) pio­neer­ing a rev­o­lu­tion­ary sys­tem in which a group of ver­ti­cal­ly inte­grat­ed dig­i­tal cur­ren­cy giants—including Binance and com­peti­tors such as FTX—will replace not only the world’s stock exchanges but also the entire glob­al finan­cial order, or b) run­ning the world’s largest unli­censed casino.

Back in Jan­u­ary, Zhao—CZ to the cryptoconversant—had been one of the 10 wealth­i­est peo­ple in the world, at least on paper. His net worth has cratered along with the price of Bit­coin, falling from $96 bil­lion to $11 bil­lion, accord­ing to the Bloomberg Bil­lion­aires Index. Even so, Binance remains the biggest com­pa­ny in cryp­to by a mile, pro­cess­ing more trans­ac­tions than the next four exchanges com­bined. Each day more than $50 bil­lion changes hands on the plat­form, which gen­er­al­ly takes a 0.1% fee. In prac­tice, that means Zhao, who is by far the com­pa­ny’s largest share­hold­er, makes mon­ey whether its cus­tomers are buy­ing or sell­ing. “Actu­al­ly, what amazed me was the resilience,” he said, refer­ring to the Ter­ra col­lapse. “There’s no bailouts. There’s no cen­tral bank. No gov­ern­ment inter­ven­tion.” The mar­ket crash was ongo­ing, but in Zhao’s mind there was­n’t much to see. The indus­try, he said, was march­ing on.

Zhao relo­cat­ed to Dubai late last year. The futur­is­tic desert city — where for­eign­ers out­num­ber locals by 9 to 1, where tourists ski indoors in 110F heat, and where any sense of place was long ago obscured by the vast wealth gen­er­at­ed by its oil-rich neigh­bors — was a fit­ting loca­tion for some­one who at times has seemed like a man with­out a coun­try. A Chi­na-born Cana­di­an cit­i­zen who emi­grat­ed to Van­cou­ver at 12 and grad­u­at­ed with a degree in com­put­er sci­ence from McGill Uni­ver­si­ty in Mon­tre­al, Zhao has bounced around the world for his entire adult life, rarely stay­ing any­where for more than a few years.

In his ear­ly twen­ties he wrote code for the Tokyo Stock Exchange. Then came a stint in New York at Bloomberg LP (which pub­lish­es this mag­a­zine). And then it was on to Shang­hai, where he co-found­ed a com­pa­ny that devel­oped soft­ware for high-fre­quen­cy traders before start­ing Binance in 2017. But the Chi­nese gov­ern­ment banned cryp­to exchanges the same year, and he went on a search for a juris­dic­tion that would­n’t try to throw his com­pa­ny out or fine him for sell­ing unreg­is­tered secu­ri­ties. “I was liv­ing out of two suit­cas­es,” he said. “Actu­al­ly, one big suit­case and one small suitcase.”

In Dubai, he final­ly felt at home. He bought an apart­ment, got a mini­van, moved his pos­ses­sions, and leased an office as part of a new phase of Binance that he described as being “the adults in the room, basi­cal­ly.” He not­ed that, at 45, he was at least a decade old­er than most cryp­to entre­pre­neurs and boast­ed about a close rela­tion­ship with the Emi­rati gov­ern­ment. Cryp­to was a much sounder invest­ment than crit­ics real­ized, he said, and Binance would be the com­pa­ny to prove it. “We have 120 mil­lion users who trust us with their life sav­ings,” he said. “We pro­tect our users. We com­mu­ni­cate with gov­ern­ments and reg­u­la­tors. You know, we’re the sta­ble guys.”

It was an auda­cious claim. Mon­ey laun­der­ing, fraud, and hack­ing have been part of the indus­try’s his­to­ry, and even the most respectable cryp­to projects can seem, to the non-laser-eyed, light­ly dust­ed with sketch. But at Binance the sketch­i­ness has a cer­tain com­plete­ness to it. The com­pa­ny is cur­rent­ly the tar­get of inves­ti­ga­tions by almost every major US finan­cial regulator—the Depart­ment of Jus­tice, the Com­mod­i­ty Futures Trad­ing Com­mis­sion, the Inter­nal Rev­enue Ser­vice, and the Secu­ri­ties and Exchange Commission—and oth­ers around the world. Binance por­trays these inves­ti­ga­tions as part of a good faith nego­ti­a­tion it’s hav­ing with gov­ern­ments, which, in its view, just haven’t known what to make of cryp­to. But it’s not at all clear the reg­u­la­tors see it that way.

Binance, whose his­to­ry is recount­ed here based on court doc­u­ments, cor­po­rate fil­ings, and inter­views with more than 40 cur­rent and for­mer employ­ees and busi­ness part­ners, grew huge by offer­ing unreg­u­lat­ed bets on small­er dig­i­tal tokens, some of which are called shit­coins. (The best known of these, Doge­coin, was ini­tial­ly start­ed as a joke and now has a mar­ket val­u­a­tion of $8 bil­lion.) From there, Binance expand­ed to high­ly lever­aged finan­cial prod­ucts tied to the val­ue of those coins. These deriv­a­tives are ille­gal in many juris­dic­tions, but that has­n’t affect­ed Binance, because it has­n’t been based in any juris­dic­tion. For years, crit­ics have warned about poten­tial loop­holes that could make it pos­si­ble for crim­i­nals and mon­ey laun­der­ers to move mon­ey through the exchange. In June, Reuters report­ed that Binance was used to laun­der at least $2.35 bil­lion, includ­ing funds from dark web drug mar­kets, North Kore­an hack­ing groups, and run-of-the-mill scammers.

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Binance says these claims are mis­lead­ing and points to a 120-per­son secu­ri­ty and inves­ti­ga­tions team that includes for­mer senior law enforce­ment offi­cials from the US, UK, and Europe. As far as Zhao is con­cerned, Binance has mere­ly been oper­at­ing as an off­shore exchange—calling to mind either a mod­ern Cay­man Islands bank, or, less flat­ter­ing­ly, the Repub­lic of Pirates, the law­less pseu­do-gov­ern­ment that con­trolled trade in the West Indies in the ear­ly 18th cen­tu­ry. Either way—and Zhao would much pre­fer the Cay­mans analogy—he said those days are over. “Office, head­quar­ters, par­ent company—at the begin­ning, we told them we don’t have that, and of course they got all pissed off,” he said, refer­ring to ques­tions from reg­u­la­tors. “So over the last year, we set all that up.”

In seek­ing accom­mo­da­tion after years of push­ing the bound­aries of the law, Zhao is fol­low­ing a path pop­u­lar among tech dis­rupters, includ­ing Airbnb, Uber, and Pay­Pal: Ignore the demands of gov­ern­ments for as long as pos­si­ble. Then, when you’re big enough, work with said gov­ern­ments to lock in mar­ket share. But cryp­to exchanges are now inter­twined with much of glob­al finance, and reg­u­la­tors have already sig­naled their desire to make an exam­ple of what they regard as the worst actors, set­ting up a con­fronta­tion of poten­tial­ly epic pro­por­tions. When it’s all over, Zhao could wind up under crim­i­nal indict­ment. Or he could be the rich­est man in the world.

Binance has always pre­sent­ed itself as a decen­tral­ized company—if “com­pa­ny” is even the right term for what Zhao is build­ing. Legal­ly speak­ing, a Cay­man Islands firm named Binance Hold­ings Ltd. owns its trade­marks (such as the logo tat­tooed on Zhao’s right fore­arm). That enti­ty’s own­er­ship has nev­er been dis­closed. Zhao is the sole own­er of Binance Cap­i­tal Man­age­ment, reg­is­tered in the British Vir­gin Islands, which bought the cryp­to data site Coin­Mar­ket­Cap for a report­ed $400 mil­lion and put up $200 mil­lion for a stake in a com­pa­ny that planned to take Forbes pub­lic. Many Binance oper­a­tions, such as the ones in Mal­ta, Sin­ga­pore, Ire­land, France, and Italy, are also entire­ly owned by Zhao, either direct­ly or through an enti­ty he con­trols, accord­ing to cor­po­rate fil­ings. Most of the trades on Binance go through the flag­ship exchange, Binance.com, which is based in who knows where and owned by God knows whom.

When traders sign up for a Binance account, they agree to do busi­ness with “par­ties that run Binance,” which, the terms of use say, may change at any time. “It appears that the Binance Plat­form is not owned by any com­pa­ny or oth­er legal enti­ty,” one lawyer wrote in a memo, obtained by Bloomberg Busi­ness­week, address­ing a client who’d sought redress after los­ing what he claimed to be $1.2 mil­lion trad­ing an obscure sta­ble­coin. The client gave up, but oth­ers who’ve tried to sue Binance have named a litany of com­pa­nies and executives.

Zhao has said in inter­views with the Chi­nese media that he only uses the term “com­pa­ny” for the sake of out­siders. As far as he’s con­cerned, Binance is an “orga­ni­za­tion.” Employ­ees are “team mem­bers.” What­ev­er it is, Binance does­n’t appear to have a tra­di­tion­al share­hold­er struc­ture or a board of direc­tors. Zhao, in keep­ing with cryp­to ide­ol­o­gy, says he’s a fan of lead­er­less move­ments that coa­lesce around the immutable log­ic of the blockchain. But when it comes to Binance, for­mer employ­ees and investors say, it’s Zhao alone who con­trols it. “At the end of the day, he’s the hold­ing com­pa­ny,” says a for­mer exec­u­tive, who, like oth­ers quot­ed in this arti­cle, request­ed anonymi­ty to avoid anger­ing Zhao.

For most investors in Binance, none of this mat­ters. Their stake in Zhao’s exchange comes not from equity—Binance appears to have hard­ly any exter­nal shareholders—but by way of its token, known as BNB. Today, the coins trade for about $220 each, at an implied total mar­ket val­ue of around $36 bil­lion, but Binance first sold them for 15¢ each in 2017 as part of an ICO—short for ini­tial coin offer­ing, an unreg­u­lat­ed cryp­to ver­sion of an ini­tial pub­lic offer­ing. “Blockchains have no bor­ders,” Binance’s investor prospec­tus declared.

Dur­ing the com­pa­ny’s ear­ly days, any­one who want­ed to trade on Binance—unlike on a reg­u­lat­ed exchange such as Coinbase—first had to acquire Bit­coin. They could trans­fer funds from a bank account to a reg­u­lat­ed exchange before send­ing them to Binance, or they could go out­side the bank­ing sys­tem, say, by sell­ing some­thing for cryp­to (a used car, opi­oids) or by buy­ing cryp­to from a fel­low enthu­si­ast and pay­ing cash. Binance.com allows any­one to open an account from almost any­where in the world with just basic per­son­al details and an email address—nothing that proves who they are. These days, users with unver­i­fied accounts can’t do much, but for years they were allowed to with­draw two Bit­coins a day, worth as much as $120,000 before the pol­i­cy changed in 2021. The com­pa­ny dropped the max­i­mum lim­it to 0.06 bit­coins, or about $1,200 a day in today’s prices. “We are prob­a­bly one of the first com­pa­nies to grow in 180 coun­tries at the same time,” Zhao now says—in oth­er words, almost all of them. “We had users every­where. We had teams everywhere.”

But every­where did­n’t mean nowhere. Zhao him­self has been a nomad, work­ing out of hotel rooms, rental apart­ments, and resorts all over the world, while com­mu­ni­cat­ing with staff via text, email, and video calls. But for years, for­mer employ­ees say, Binance also had a clan­des­tine home base. This was incon­ve­nient, not only because it went against the com­pa­ny’s pro­fessed ide­ol­o­gy of being a decen­tral­ized “orga­ni­za­tion” but also because the home base hap­pened to be in Chi­na, where cryp­to was ver­boten. And so, even as Bei­jing shut­tered rival exchanges, more than 100 Binance employ­ees report­ed each day to an office in the Huang­pu dis­trict of Shang­hai, where they sat at con­ven­tion­al work­sta­tions with bilin­gual name cards on their desks. They were hired and applied for busi­ness visas using a cor­po­rate alias, Ruique Cul­tur­al Devel­op­ment, and were, they say, urged to be care­ful wear­ing com­pa­ny merch in pub­lic and to avoid telling any­one where they worked.

Then, in Novem­ber 2019, they were told to pack up and leave the premis­es. They boxed up com­put­ers, desk toys, and oth­er knick­knacks. Some balled up their name cards and ran them under water in the bath­room sinks to make them unread­able, accord­ing to sev­er­al who were there at the time. They were reas­signed to a con­stel­la­tion of cowork­ing spaces around Shang­hai or they went abroad as Zhao did.

When the Block, a cryp­to news out­let, report­ed that the Huang­pu office had been the sub­ject of a “police raid” as part of Chi­na’s crack­down on cryp­to, Zhao denied it. Not only had there been no raid, he claimed, there was no Binance office in Shang­hai at all. “No police, no raid, no office,” he tweet­ed. He referred to the Block­’s report as “FUD,” an acronym for “fear, uncer­tain­ty, and doubt” used as a slur in cryp­to cir­cles to describe any news deemed unhelp­ful to per­cep­tions about Bit­coin. “We will be suing,” he added. The Block updat­ed its sto­ry, clar­i­fy­ing that the term “raid” was dis­put­ed, but it oth­er­wise held firm.

Zhao did­n’t sue. Nor, dur­ing the inter­view at the Dubai Four Sea­sons, did he deny the exis­tence of a Shang­hai office. “Some gov­ern­ment offi­cial vis­it­ed the office,” he said. “It was­n’t even a reg­u­la­tor. He was just a gov­ern­ment offi­cial.” Then he launched into a bit of media crit­i­cism. “You can write two very dif­fer­ent nar­ra­tives as a jour­nal­ist, right?” he con­tin­ued, with a con­spir­a­to­r­i­al smile. “You can say, ‘This guy escaped into a restau­rant,’ or you can say, ‘The guy walks slow­ly into the restau­rant and enjoys the sun­shine view.’ ”

He paused and looked around, as if to indi­cate his pref­er­ence. We were in a com­plete­ly emp­ty room that had been vet­ted by Zhao’s secu­ri­ty guard. There was also sun com­ing in through the win­dows. He con­tin­ued: “There’s a lot of nar­ra­tives around that are based on very inac­cu­rate information.”

The cryp­tocur­ren­cy indus­try has always had a thing about nar­ra­tives. Nation­al cur­ren­cies, Bit­coin boost­ers have long point­ed out, are based on lit­tle more than col­lec­tive belief and gov­ern­ment decree, the “fiat” in fiat mon­ey. But while the dol­lar ben­e­fits from the wide­spread agree­ment that it will more or less hold its val­ue over time, cryp­tocur­ren­cies have spread because of a shared con­vic­tion among the faith­ful that they will go way up, with lit­tle regard for their inher­ent use­ful­ness. “Why? I don’t know f—ing why. It could be a Ponzi scheme,” said Dave Port­noy, the sports media entre­pre­neur who, briefly, served as a mas­cot to meme stock investors, when describ­ing an invest­ment in an obscure token that was­n’t trad­ed on Binance. “If it is a Ponzi, get in on the ground floor.”

Binance, says a trad­er who uses the exchange, is “a mas­sive shit­coin casi­no.” The per­son, who asked for anonymi­ty because he’s wor­ried Binance might retal­i­ate and freeze his account, says Zhao deserves cred­it for rec­og­niz­ing that a big part of cryp­to’s appeal was pure spec­u­la­tion. “He took the dumb­est parts of the indus­try and made it very easy to use.” The mes­sage from Binance has always been, the trad­er says, “go buy your Doge­coins and get rich.” A Binance spokes­woman, Jes­si­ca Jung, notes that some cryp­to exchanges offer even more tokens than Binance and that the com­pa­ny employs a “rig­or­ous process” to vet its list­ings. She says that after Ter­ra’s col­lapse Binance began eval­u­at­ing how coins are advertised.

Even so, Binance’s approach to shit­coins became a key dif­fer­en­tia­tor dur­ing the com­pa­ny’s ear­ly days: Where­as Coin­base, the big US exchange, offered just three tokens, Binance sold more than 100. It hawked them like pro­tein shakes, with a mul­ti­level mar­ket­ing-style refer­ral pro­gram in which influ­encers received a cut of the trad­ing fees of any­one they referred. Binance ran con­tests in which users with the high­est trad­ing vol­umes com­pet­ed for prizes, includ­ing Lam­borgh­i­nis and Maser­atis, while vol­un­teers, known as Binance Angels, pro­mot­ed the com­pa­ny in Telegram chats and threw in-per­son events to spread the wis­dom of putting your mon­ey into cryp­to. Binance says the Angels work for free, moti­vat­ed not by a desire to get rich, but by a love of the cryp­to com­mu­ni­ty. “They are like priests,” says co-founder He Yi, a for­mer TV host who refash­ioned her­self as a cryp­to influ­encer and is now the com­pa­ny’s chief mar­ket­ing officer.

Despite claims made in the ICO that Binance would be a “pure cryp­to” exchange, Zhao seems to have har­bored much broad­er ambi­tions almost from the begin­ning. A for­mer prod­uct man­ag­er recalls being told in a 2017 job inter­view that Binance would seek to dom­i­nate not only the mar­ket of cryp­tocur­ren­cy exchanges but also a stock exchange like Nas­daq. To do that, it would need to serve cus­tomers who did­n’t already own cryp­to, which would mean deal­ing with bank­ing sys­tems and reg­u­la­tion. “The ear­ly cryp­to adopters, they’re OK with off­shore,” Zhao said at the Dubai Four Sea­sons. “But the rest are aver­age users. They prob­a­bly pre­fer a reg­u­lat­ed exchange.”

Oth­er cryp­to exchanges had made sim­i­lar cal­cu­la­tions, but while Coin­base devel­oped poli­cies that seemed designed to keep US reg­u­la­tors at bay, such as requir­ing users to show a gov­ern­ment ID, Binance adopt­ed an approach in keep­ing with its more free­wheel­ing ethos. Binance.com would remain an unreg­u­lat­ed exchange, but the com­pa­ny would also work to set up reg­u­lat­ed local exchanges where users could buy cryp­to with dol­lars or oth­er nation­al currencies.

Binance court­ed gov­ern­ments in Japan, Mal­ta, and Sin­ga­pore, which all even­tu­al­ly moved to block it from open­ing, while reg­u­la­tors elsewhere—including the Nether­lands, South Africa, Thai­land, and even the Cay­man Islands—warned that the exchange was­n’t allowed to oper­ate local­ly. Zhao described these fail­ures as set­backs, part of a process of “look­ing at mul­ti­ple places to try to see which would become more favor­able towards crypto.”

Things were even more chaot­ic in the UK, where there were two com­pet­ing Binance operations—a hall­mark, for­mer employ­ees say, of a scat­ter­shot busi­ness strat­e­gy that fueled intense inter­nal rival­ries. The two sub­sidiaries had so lit­tle con­tact that an exec­u­tive at one said he only dis­cov­ered the oth­er when he was con­grat­u­lat­ed on hav­ing hired some­one he’d nev­er met. Binance’s Jung says the UK teams worked togeth­er. “It’s not scat­ter­shot,” she says, of the com­pa­ny’s strat­e­gy. “It’s pur­pose­ful.” In June 2021 the UK’s Finan­cial Con­duct Author­i­ty ordered one of the sub­sidiaries, Binance Mar­kets Ltd., to halt any “reg­u­lat­ed activ­i­ties” and to dis­play a notice on its web­site indi­cat­ing that it was­n’t autho­rized to do busi­ness in the coun­try. It declared Binance “not capa­ble of being effec­tive­ly super­vised.” Binance dis­played the notice on its UK site, but Binance.com remained open to traders in the coun­try, since, legal­ly, it has noth­ing to do with the chid­ed British affiliate.

In 2019, Zhao formed Binance.US, which he said would be total­ly inde­pen­dent and seek to com­ply with US laws by lim­it­ing access to riski­er offer­ings. But in 2020, Forbes report­ed that it had obtained a leaked doc­u­ment describ­ing a pro­posed “bait and switch” strat­e­gy in which Binance.US would be a ruse designed to draw scruti­ny away from the main exchange. Binance said the pro­pos­al had been mis­rep­re­sent­ed and sued for defama­tion, with Charles Hard­er, the lawyer famous for tak­ing down Gawk­er Media on behalf of Peter Thiel, lead­ing the case.

Forbes stood behind its sto­ry, and Binance even­tu­al­ly dropped the suit. “The arti­cle’s inac­cu­rate,” Zhao said in Dubai, though he added that the dis­pute did­n’t fac­tor into his deci­sion to put up $200 mil­lion for a stake in the mag­a­zine, and that he won’t inter­fere with edi­to­r­i­al mat­ters. When asked what in the arti­cle was inac­cu­rate, he said he was­n’t sure. Zhao has­n’t been to the US in years, which some take as an acknowl­edg­ment of the fear that he might be arrest­ed. He said this isn’t the case; he’s only avoid­ing the coun­try so as not to pro­voke a con­fronta­tion. “I think I’m total­ly allowed in the US, no prob­lem,” he said. “But I don’t want to give the per­cep­tion that we’re try­ing to solic­it users there.” When he speaks at US con­fer­ences, he does so by Zoom.

Binance is now the sub­ject of SEC probes into the pos­si­ble sale of unreg­is­tered secu­ri­ties dur­ing the 2017 ICO and insid­er trad­ing. It also faces ques­tions from the agency about the rela­tion­ship between the glob­al exchange and the US arm. Todd White, man­ag­ing part­ner of Rulon & White Gov­er­nance Strate­gies, a Wash­ing­ton lob­by­ing firm focused on cryp­tocur­ren­cies, says these inves­ti­ga­tions are the result of Zhao’s fail­ure to take com­pli­ance seri­ous­ly. “They were just cre­at­ing exchanges around the world,” White says. “I under­stand that you’re try­ing to build some­thing, but anti-mon­ey-laun­der­ing rules are important.”

White says he urged Binance exec­u­tives to take com­pli­ance more seri­ous­ly in a 2018 meet­ing but was rebuffed. “They were very dis­mis­sive,” he says. “The amor­phous­ness is a strate­gic choice. You can’t sue a cloud.” Binance dis­putes this account and says it takes com­pli­ance seriously.

Iron­i­cal­ly for a com­pa­ny built on a skep­ti­cism of Wall Street, Binance is more cen­tral­ized than even the biggest finan­cial insti­tu­tions. Today it is, simul­ta­ne­ous­ly, an exchange, a bro­ker­age, a sav­ings bank, a ven­ture cap­i­tal investor, a data provider, and a “shit­coin casi­no” oper­a­tor. It is, in oth­er words, Nas­daq, Charles Schwab, Bank of Amer­i­ca, Andreessen Horowitz, Morn­ingstar, and Cae­sars Palace, all rolled into one. Zhao’s cryp­to orga­ni­za­tion “is ver­ti­cal­ly inte­grat­ed in a way you’d nev­er allow a tra­di­tion­al finan­cial insti­tu­tion to be,” says Lex Sokolin, an econ­o­mist at blockchain com­pa­ny Con­Sen­sys Soft­ware Inc.

Binance’s busi­ness mod­el is, in short, rife with poten­tial con­flicts of inter­est. For exam­ple, giv­en its size, a list­ing on its exchange typ­i­cal­ly sends the price of the coin soar­ing, and there have been spikes of trad­ing activ­i­ty just ahead of Binance list­ings, lead­ing some crit­ics to sus­pect insid­er trad­ing. Jung, the Binance spokes­woman, says that employ­ees are held to a “strict eth­i­cal code” that pro­hibits short-term trad­ing. She says the com­pa­ny fires any­one found to have vio­lat­ed that policy.

The com­pa­ny is pop­u­lar with cryp­to traders, but its his­to­ry has includ­ed out­ages, with­draw­al freezes, and at least one hack. Even as Binance and com­pet­ing cryp­to exchanges mature, they con­tin­ue to be run in ways counter to reg­u­la­tions designed to pro­tect con­sumers, says John Reed Stark, for­mer chief of the SEC Office of Inter­net Enforce­ment. “They’re just oper­at­ing with absolute­ly no fidu­cia­ry infra­struc­ture, no con­sumer pro­tec­tion, no oversight—just com­plete­ly free to be you and me,” he says. “It’s not what you want when it comes to your finances.”

In Dubai, Zhao point­ed out that many of the crit­i­cisms of Binance could just as eas­i­ly apply to the com­pa­ny’s rivals. Numer­ous cryp­to exchanges have been charged with crimes or secu­ri­ties vio­la­tions, and even well-estab­lished com­peti­tors have run into reg­u­la­to­ry trou­ble. Sam Bankman-Fried, an FTX co-founder and Zhao rival, has used his wealth and media savvy to donate enor­mous sums to Demo­c­ra­t­ic politi­cians and to recruit endorse­ments from Tom Brady, Gise­le Bünd­chen, and Steph Cur­ry, but FTX has also bounced among tax havens. (It’s cur­rent­ly based in the Bahamas.) Mean­while, Coin­base, after tak­ing a con­ser­v­a­tive approach in its ear­ly years, has since embraced shit­coins and now lists more than 100 tokens includ­ing Doge­coin and Shi­ba Inu—a Doge-like cur­ren­cy that’s some­how func­tioned both as a meta joke and a real invest­ment oppor­tu­ni­ty amid the hype cycle. Coin­base’s web­site includes guides explain­ing, among oth­er things, how to invest in a lever­aged shit­coin index whose tick­er sym­bol is “Bull­shit.” (Binance has a sim­i­lar guide.) Bull­shit’s price has plunged 99.96% since last fall.

Zhao acknowl­edged some mis­steps on his com­pa­ny’s part and said he’s changed course over the past year. Pre­vi­ous­ly, Binance tried to explain to reg­u­la­tors why a mas­sive, unreg­u­lat­ed cryp­to exchange was no big­gie. But Zhao has come to real­ize, as he put it, that “we’re not going to edu­cate them and change their minds on that. It’s eas­i­er for us to change than for them to change.”

Zhao has sought to ham­mer home this point by way of an influ­ence cam­paign of sorts. The Forbes invest­ment, through a pro­posed spe­cial pur­pose acqui­si­tion com­pa­ny, looks to have fall­en apart as investors have soured on SPACs. But Binance has plowed tens of mil­lions of dol­lars into high-pro­file soc­cer spon­sor­ships (these includ­ed Argenti­na’s nation­al club, Italy’s Lazio, and Brazil’s top-tier league) and pledged $500 mil­lion to back Elon Musk’s bid to take over Twit­ter. “We want to sup­port free speech,” Zhao said of the Musk deal, though when asked how to square that deci­sion with hir­ing Hard­er and suing Forbes, he equiv­o­cat­ed. “Free speech is very hard to define,” he said. “I’ve nev­er talked to Charles Hard­er. Our team han­dled it.”

As part of Zhao’s new adult-in-the-room phase, he’s been on a media kick. His pub­li­cists had sug­gest­ed he’d give Busi­ness­week a glimpse of his human side, per­haps a tour of his favorite parts of his new home­town. But Zhao seems to have few dis­cernible inter­ests out­side of work, and the tour was down­grad­ed to a 10-minute dri­ve from one hotel to anoth­er in Zhao’s mini­van, a black Toy­ota Granvia.

“Peo­ple rec­om­mend­ed a Rolls Royce or a Bent­ley, but none of those cars have the seats that go flat,” Zhao said, press­ing a but­ton and low­er­ing him­self into the knees of one of the two han­dlers who sat in the third row. “That was my only require­ment.” It was appar­ent, as we drove, that if he had a favorite thing about Dubai, it was­n’t the indoor ski­ing or the ultra­mod­ern architecture—it was the accom­mo­dat­ing reg­u­la­to­ry cli­mate. It’s hard to give a tour of that.

There were oth­er signs that Zhao’s piv­ot to con­ven­tion­al­i­ty might not be entire­ly urgent. The day of the inter­view, Zhao said a reporter could vis­it the new Dubai office. But after a flur­ry of emails, calls, and texts, dur­ing which assis­tants and PR con­sul­tants made an array of excus­es, a Binance rep­re­sen­ta­tive said that in fact the office was closed because of a surge in Covid-19 cas­es. That was odd: Zhao had made no ref­er­ence to the dis­ease dur­ing the inter­view, nor had any­one else at the com­pa­ny. The pre­vi­ous day, Binance had arranged a sep­a­rate inter­view with the com­pa­ny’s head of Mid­dle East­ern oper­a­tions, who showed up unmasked at a crowd­ed hotel lob­by where he appeared to be con­duct­ing in-per­son meetings.

Ten days lat­er, Binance’s head of pub­lic­i­ty offered Busi­ness­week a vir­tu­al tour led by a mem­ber of the HR team, Peng Pheng Tan. Before the tour, Binance had explained that the offices weren’t exact­ly bustling but gave the impres­sion that there was at least some activ­i­ty in them. “So, we have offices,” Zhao had said, “but peo­ple only go to the offices a cou­ple of days a week.” Tan con­veyed some­thing sim­i­lar as she stepped into an ele­va­tor in a build­ing near the Dubai World Trade Cen­tre, livestream­ing the view from her phone. “We’re doing a hot-desk sys­tem,” she said.

Then she passed through a set of blue doors. Inside was an expan­sive space with an amaz­ing view of cen­tral Dubai. There were bare con­crete floors, exposed ducts, drywall—and noth­ing else. There was an awk­ward pause. “Nobody is com­ing here,” she said. Anoth­er pause. “Yeah, basically.”

Zhao and the rest of the Binance exec­u­tive team, mean­while, were on the move again. He flew to France the day after the inter­view to attend the Cannes Film Fes­ti­val (Binance was host­ing a piz­za give­away dur­ing the event) and then it was on to Paris for the sum­mer. He’d been enjoy­ing a run of suc­cess in Europe, where Binance Italy recent­ly received reg­u­la­to­ry approval along with Binance France. Late­ly, Zhao had been talk­ing up the pos­si­bil­i­ty that Paris might serve as anoth­er home base.

The fol­low­ing month, Zhao tweet­ed that unlike oth­er cryp­to com­pa­nies, which were lay­ing off employ­ees amid the slow­down, Binance was “hir­ing for 2000 open posi­tions.” He tweet­ed a pic­ture of him­self extend­ing a hand to an imag­i­nary hire inside what appeared to be a bustling office. It was invit­ing, if not exact­ly authen­tic. The office is iden­ti­cal to one found on Shut­ter­stock, a free stock image web­site. Zhao’s head had been pho­to­shopped onto a mod­el’s body. Binance’s Jung says the tweet was “part of a meta joke,” as if Zhao were doing his own Shi­ba Inu bit. The tweet received more than 50,000 likes.

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