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The world’s largest crypto exchange, Binance, and its founder, Changpeng Zhao, pleaded guilty yesterday to criminal charges in the US, releasing a wave of pent-up tension that had hung over the crypto industry for years.
Zhao, who also went by CZ, was one of the poster boys for crypto’s freewheeling and rebellious spirit, which hearkens back to the origins of the technology, built to undergird a parallel financial system outside the control of any government or bank. Under his leadership, Binance grew to become by far the world’s largest crypto exchange, but frequently clashed with regulators in the US and elsewhere. The company refused to establish a formal headquarters. According to the criminal indictment filed against Zhao in the US, he “prioritized growth and profits over compliance” and sought to take advantage of what he described as the “gray zone.” Zhao instructed employees that it was “better to ask for forgiveness than permission,” the indictment states.
Although Zhao frequently tried to shrug off criticism of Binance on X, formerly Twitter, the investigation into the firm by the US Department of Justice was an open secret. It was also a source of collective anxiety for stakeholders across the industry, in which Binance had become deeply entrenched. If the exchange were to have buckled under the stress of a criminal conviction, the damage to investors would have been catastrophic and the ripple effects far-reaching.
The agreement cut between Binance and the DOJ—under which the exchange must pay a $4.3 billion penalty, operate under tightened supervision by US authorities, and replace Zhao as CEO—is among the best possible outcomes for crypto. “It cleans up the industry’s image,” says market analyst Noelle Acheson, formerly of crypto brokerage Genesis. “Zhao could have laid low in any one of a number of no-extradition jurisdictions,” she says, but his guilty plea sends the message that Binance “wants to work with regulators going forward.”
There is an extent to which Zhao was the last of his breed. In the wake of the collapse of crypto markets in May 2022, which brought to an end a period of frenzied hype and reckless spending that sent the price of crypto tokens to record highs, many of the industry’s figureheads have either been charged with or convicted of felonies. In February, the US government brought charges against Do Kwon, creator of the Terra-Luna stablecoin whose collapse in spring 2022 tipped the first fateful domino in the industry. In July, the DOJ charged Alex Mashinsky, founder of bankrupt crypto lender Celsius, with “orchestrating a scheme to defraud customers.” Earlier this month, Sam Bankman-Fried, leader of crypto exchange FTX and archrival to Zhao, was found guilty of overseeing a multibillion-dollar fraud.
Binance’s new chief executive is of a pointedly different flavor, though. Replacing Zhao is Richard Teng, a former regulator who has little public profile. Teng had been tipped as a successor to Zhao since his promotion to head of regional markets at Binance in June, though he refused to be drawn on the question in an interview with crypto outlet CoinDesk at the time. He previously held the role of head of Asia, Europe, and MENA at the exchange.
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A source with knowledge of the company’s succession plan tells WIRED that Teng is well respected among Binance employees and a popular choice for the role.
Acheson says the appointment of Teng—formerly CEO at Abu Dhabi Global Market, a financial regulator in the United Arab Emirates—can be interpreted as another sign that “Binance wants to cooperate with regulators.”
The agreement between Binance and the DOJ “signals a regime change in the industry,” says Nic Carter, general partner at crypto VC firm Castle Island Ventures. “The paradigm of offshore, largely unregulated exchanges running rings around their onshore, more regulated counterparts is over … [The deal] makes it clear you can’t win by refusing to follow the rules.”
The “optics of the deal” might be “challenging” in the medium term, says Carter, giving “more ammo to folks on the Hill that consider crypto a tool for illicit finance.” But overall, he says, the feeling is one of “relief.”
In his first post on X after taking the role, Teng signaled that his experience in the regulatory sphere will dictate his approach to steering Binance, which had charted a more unpredictable course under Zhao. “To ensure a bright future, I intend to use everything I’ve learned over the past three decades of financial services and regulatory experience to guide our remarkable, innovative, and committed team,” Teng wrote.
In a public statement detailing its settlement with the DOJ, Binance struck a similar tone. “Binance has been systematically working to restructure our organization and personnel, upgrade our systems, and establish a new industry standard in compliance,” it said. The word “compliance” appears in the statement on 20 separate occasions.
The implied message: Things are about to get a whole lot more boring.
