Changpeng Zhao remains at the top of Forbes’ list of individuals with cryptocurrency wealth. How did he amass such great fortune?
Changpeng Zhao has continued to rank among the wealthiest individuals for several years, despite facing legal challenges and incurring billions in fines in 2023. In early April, Forbes released its updated billionaire list including 17 cryptocurrency industry pioneers. Notably, the founder and ex-CEO of Binance took the lead with an estimated net worth of $47.7 billion.
Profiting from Binance’s success
In the year 2017, Changpeng Zhao introduced Binance Coin (BNB), allocating $200 million worth of it. Since then, the value of Binance Coin has significantly risen, with its price approximately equal to $540. Boasting a market capitalization of around $80 billion, BNB holds the position as the fourth largest cryptocurrency in existence.
In the fifth round of investment for Binance, Changpeng Zhao obtained a substantial, yet undivulged, stake. With a total investment of $3 billion up to that point, his affluence was evaluated to be around $100 billion in 2022.
Moreover, the company was actively pursuing acquisitions as mentioned by Zhao in a conversation with Bloomberg in April 2021.
“Approximately 20 to 30 businesses will be acquired by us annually. The majority of these acquisitions are relatively small and go unannounced. However, there will also be larger acquisitions similar to CMC. In total, we aim for around three deals every month, resulting in approximately 30 acquisitions per year.”
Changpeng Zhao, founder and former CEO of Binance
Changpeng Zhao bought a cryptocurrency data tracking site in the first half of 2020, without disclosing the acquisition cost. According to Zhao, this deal was made to broaden Binance’s operations.
Based on Business of Apps’ data, Binance saw significant earnings with reported annual revenues estimated at around $5.5 billion in 2020, $20 billion in 2021, and $12 billion in 2022.
In the year 2023, the crypto industry, including Binance which initially held a 55% market share, underwent regulation for the first time. This led to a significant decrease in on-chain activities for Binance, resulting in fewer reserves and reduced trading volumes. Consequently, regulatory issues caused Binance’s market share to shrink to 32%. However, by January, it managed to regain some ground and rose back up to a 48% market share.
Because of legal problems, the value of the company dropped significantly, causing Zhao’s net worth to shrink to $40 billion. Following his resignation as Binance’s CEO, Zhao agreed to pay a fine of $50 million and the company consented to pay a fine and compensation totaling $4.3 billion. However, Zhao’s power over the company remains intact unless he sells a large portion of his ownership stake.
Zhao’s other assets and investments
The majority of Changpeng Zhao’s fortune is derived from his stake in Binance as well as his investments in BNB and Bitcoin cryptocurrencies. Additionally, he holds other valuable assets.
Real estate
Changpeng Zhao, a cryptocurrency billionaire, owns at least two properties in Dubai, which he admires for its supportive attitude towards cryptocurrencies. He has expressed his appreciation for the city’s business-friendly atmosphere and bought real estate as a symbol of his dedication to Dubai. Previously, Zhao had stated that he shied away from owning cars or property due to their perceived lack of liquidity.
FTX and Twitter
Changpeng Zhao’s ventures beyond Bitcoin, Binance, and BNB are still unknown to the public. Yet, in 2019, he made an investment in FTX, a competing cryptocurrency exchange established by Sam Bankman-Fried. Noteworthy is that Bankman-Fried was previously a prominent crypto tycoon but currently resides in prison, awaiting trial and sentencing on fraud allegations.
In the year 2021, Changpeng Zhao chose to part ways with FTX and pocketed a massive $2.1 billion. This decision turned out to be prescient as FTX experienced a collapse in the following year, causing ripples throughout the cryptocurrency market.
Alongside a $44 billion investment led by Elon Musk, his corporation additionally committed $500 million. This was not an individual financial decision but rather a calculated business move.
In an interview with Associated Press in November 2021, Zhao revealed that the majority of his fortune is invested in cryptocurrencies such as Bitcoin and BNB. If he held onto these digital assets until the end of 2023, he would have seen significant gains as the cryptocurrency market rebounded from a slump, with Bitcoin’s value experiencing a notable increase.
Financial struggles due to SEC
In June 2023, the US Securities and Exchange Commission (SEC) brought legal action against Binance for allegedly circumventing regulations that barred American users from utilizing its platform. The SEC further asserted that Binance failed to implement sufficient anti-money laundering safeguards, exaggerated trading volumes, and mismanaged client funds. Binance denied these charges and responded with a court dispute.
In June 2023, Binance.US saw its value on the Bloomberg Wealth Index drop to zero following an announcement that they would cease dollar transactions. Previously, Binance.US was worth $4.7 billion in March 2022 and CZ’s net worth peaked at $96 billion in January of the same year. However, CZ’s wealth took a significant hit, decreasing by 82% at one point.
According to Bloomberg’s report from October 2023, regulatory crackdowns and market declines caused CZ’s wealth to shrink to an estimated $17.2 billion.
Restoring Zhao’s wealth
By the close of 2023, Zhao’s wealth had soared, resembling the mythical phoenix’s rebirth. According to Bloomberg reports from the previous year-end, the founder and ex-CEO of Binance saw an estimated net worth surge to a staggering $37.2 billion, fueled by the cryptocurrency market’s revival.
The value of CZ’s wealth is currently higher than it was in June, but still short of his record high in January 2022. This represents an increase of approximately $25 billion since the beginning of the year. Notably, this growth is over five times larger than the $4.3 billion settlement Binance reached with the U.S. Department of Justice last November.
To estimate CZ’s net worth, Bloomberg analysts primarily considered his 90% ownership of Binance and 86% control of Binance.US’s American branch. Moreover, CZ disclosed investments in Bitcoin and BNB, but the exact sums remain undisclosed and should be factored into his total wealth. The certainty level for this wealth evaluation is quite low.
Unknown profit of a known exchange
Changpeng Zhao, Binance’s founder, hasn’t revealed his specific wealth and earnings to the public. Nevertheless, due to Binance controlling almost half of the cryptocurrency market share, many believe Zhao is the industry’s richest person. Although Binance’s financial information remains undisclosed, its substantial market dominance implies potential profits much greater than those of rivals. As the proprietor of the company’s largest stake, Zhao stands to gain substantially from Binance’s prosperity.
In addition, the bounce back of the cryptocurrency market benefits all involved parties. While Binance hasn’t disclosed recent earnings data amidst the market rebound, it’s likely that Zhao’s fortune not only remained intact but also expanded due to the surge in market share, Bitcoin value, and the overall expansion of digital asset worth.
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2024-04-18 16:08