The world's biggest digital currency exchange was founded by Changpeng Zhao. He is in the middle of a brutal winter.

Binance CEO Changpeng Zhao.

Changpeng Zhao is the CEO of the world's largest coin exchange.

Photographer: Laura Stevens for Bloomberg Businessweek

During the first few months of this year, when buying digital token named after dog meme 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 bicyle exchange promoted a new, low Customers were urged to invest in TerraUSD. A stable coin is a type of coin that promises to always be worth $1. Customers who used the service to buy, sell, and invest in various cryptocurrencies were told that this particular stable coin had an annual return of almost 20%. TerraUSD could possibly be both safe and high yield according to the suggestion.

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Terra turned out to be neither safe nor high yield due to the usual rules of finance. Critics say that the coin was a Ponzi scheme that caused companies to lay off employees and freeze customer withdrawals. The industry has named the downturn theCrypto winter, because of the 70% decline in the price of the digital currency.

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The bad news for investors swept up in the frenzy was that this was the case. The extent of the Terra-related losses was disclosed by the CEO on May 16. The company's stake had been worth more than $1 billion. Zhao wasn't issuing any warnings. He said in an interview that there were a few things about him. I don't pay much attention to money.

The comment, made as he sipped a glass of orange juice at a French restaurant in a Four Seasons hotel, was hard to believe, coming as it did from the richest man in an industry that's all about money. There is a shaved head, soft voice, and wardrobe that seems to consist of black shirts. He's a cipher. Depending on who you talk to, he is either a pioneer of a revolutionary system in which a group of vertically integrated digital currency giants will replace not only the world's stock exchanges but also the entire global financial order.

Zhao was one of the 10 wealthiest people in the world at the time. The value of his net worth fell from $96 billion to $11 billion, as the price of the digital currency fell. Even though it's not the biggest company by a mile, it still processes more transactions than any other exchange combined. The platform takes a small fee for every $50 billion changed hands. The company makes money regardless of whether its customers are buying or selling. He said that he was amazed by the resilience of the collapse. There isn't any bail outs. The central bank isn't there. Government intervention is not on the agenda. There wasn't much to see as the market crashed. He said that the industry was moving forward.

There was a change of address 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 its oil rich neighbors, was a fitting location for someone who at times has seemed like a man without. A Canadian who was born in China and graduated from a Montreal university with a degree in computer science has spent his entire adult life bouncing around the globe.

He wrote code for the Tokyo Stock Exchange when he was young. There was a time in New York at the company that publishes this magazine. He co-founded a company in China that developed software for high-frequency traders before starting his own company. He went on a search for a jurisdiction that wouldn't fine him or throw his company out because of the Chinese government's ban oncryptocurrencies. He lived out of two suitcases. One large suitcase and one small suitcase.

He felt like he was at home in the city. He moved his possessions, got a minivan, and leased an office as part of a new phase of Binance that he described as being "the adults in the room, basically." He boasted that he was at least a decade older than most of his peers and that he had a close relationship with the government of the United Arab Emirates. He said that the company would prove that the investment was a sound one. 120 million people trust us with their life savings. Users are protected by us. We talk to regulators. We are the stable men.

It was a big deal. Money-laundering, fraud, and hacking have been a part of the industry for a long time. There's a certain completeness to the sketchiness. The company is under investigation by the Department of Justice, the Commodity Futures Trading Commission, the Internal Revenue Service, and the Securities and Exchange Commission. In its view, the investigations are part of a good faith negotiation it is having with governments, which have not known what to think of the coin. The regulators don't seem to see it that way.

According to court documents, corporate filings, and interviews with more than 40 current and former employees and business partners, the company grew huge by offering unregulated bets on smaller digital token, some of which are called shit coins. Doge coin is the best known of these and has a market valuation of $8 billion. Financial products tied to the value of the coins were expanded by the company. The derivatives are illegal in a lot of countries, but they haven't been based in any of them. Critics have warned about potential loopholes that could allow criminals to move money through the exchange. In June of this year, it was reported that at least $2.35 billion was laundered from dark web drug markets, North Korean hacking groups, and run-of-the-mill scam artists.

The 120-person security and investigations team is made up of former senior law enforcement officials from the US, UK, and Europe. The Republic of Pirates was a lawless pseudo-government that controlled trade in the West Indies in the early 18th century, and as far as Zhao is concerned, that's the only thing that's going on with the exchange. The days of those days are over, according to him. He said that they told the regulators that they didn't have that and that they got angry. Over the last year, we put all that up.

After years of pushing the boundaries of the law, Zhao is following a path popular among tech disrupters, which is to ignore the demands of the government. Work with governments to lock in market share when you are large. Regulators want to make an example of what they consider to be the worst actors in order to set up a confrontation of potentially epic proportions. There is a chance that Zhao will end up under criminal indictment when it is all done. He could be the wealthiest person in the world.

It's possible to write two very different narratives as a journalist. 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.'

If the term "company" is even the right one for what Zhao is building, then it's a good thing. The logo tattooed on Zhao's right forearm is a trademark of the firm. The entity's ownership has never been made public. The British Virgin Islands is where the sole owner of the company is, and he put up $200 million for a stake in a company that was planning to go public. According to corporate filings, many of the operations in Malta, Singapore, Ireland, France, and Italy are completely owned by Zhao. The flagship exchange is based in who knows where and who is owned by God.

The terms of use say that when traders sign up for a Binance account, they agree to do business with the parties that run the platform. One lawyer wrote in a memo that the platform was not owned by any company or legal entity. A number of companies and executives have been named as a result of the lawsuits.

In interviews with the Chinese media, he said that he only uses the term "company" for outsiders. As far as he knows, it is an organization. The employees are part of a team. The company doesn't appear to have a board of directors. He is a fan of leaderless movements that coalesce around the logic of the ledger. Former employees and investors say that there is only one person in control of the company. A former executive who was quoted in the article said that he was the holding company at the end of the day.

This doesn't matter to most investors in the world. By way of its token, known as BNB, they have a stake in the exchange that doesn't come from equity. Today, the coins trade for about $220 each, at an implied total market value of $36 billion, but they were originally sold for 15 each as part of an initial coin offering. According to the investor prospectus, cryptocurrencies have no borders.

The first thing anyone who wanted to trade on the exchange had to do was buy Bitcoins. They can transfer funds from a bank account to a regulated exchange, or they can go outside the banking system and buy or sell a used car, for example. Anyone can open an account from almost anywhere in the world with just basic personal details and an email address, but they can't prove who they are. Users with unverified accounts used to be able to withdraw two Bitcoins a day, worth as much as $120,000 before the policy changed. In today's prices, the maximum limit is about $1,200 a day. The company is one of the first to grow in 180 countries at the same time. Users were everywhere. There were teams all over the place.

Wherever it was, it didn't mean nowhere. He has worked out of hotel rooms, rental apartments, and resorts all over the world, while communicating with staff through text, email, and video calls. For a long time, former employees say, the company had a secret home base. This was inconvenient, not only because it went against the company's professed ideology of being a distributed organization, but also because the home base was in China. Even as Beijing shut down rival exchanges, more than 100 employees of the company reported to an office in theHuangpu district of Shanghai, where they sat at traditional workstations with bilingual name cards on their desks. They were hired and applied for business visas using a corporate name and were told to not tell anyone where they worked.

They were told to pack up in November. Computers, desk toys, and other items were boxed up. Several people who were there at the time said that some people balled up their name cards and ran them under the sink to make them unreadable. They were either relocated to a constellation of co-working spaces around the city or went abroad.

The Block reported that the Huangpu office had been the subject of a police raid as part of the Chinese government's efforts to crack down on digital currency. He claimed that there was no office in the city. He said there was no police, no raid, and no office. He referred to the Block's report as "FUD", an acronym for "fear, uncertainty, and doubt", used as a slur in the community to describe any news that is not helpful to the perception of the coin. He said they will be filing a lawsuit. The term "raid" was disputed, but The Block remained firm.

The person didn't file a lawsuit. He did not deny the existence of aShanghai office during the interview. The official visited the office. It wasn't a regulatory body. He was a government employee. He began to criticize the media. He smiled and said that he could write two very different narratives as a journalist. You can say, "This guy escaped into a restaurant" or you can say, "The guy walked slowly into the restaurant and enjoyed the sunshine view."

He looked around to see if he had a preference. The room we were in was completely empty and had been checked out by a security guard. The sun was shining through the windows. A lot of narratives are based on incorrect information.

The narrative has always been a big part of the criptocurrency industry. National currency is based on collective belief and government decree, the "fiat" in money. 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. What's the reason? I don't understand why. Dave Portnoy, the sports media mogul who briefly served as a mascot to meme stock investors, described an investment in an obscure token that wasn't traded on Binance as a Ponzi scheme. Get in on the ground floor if it's a Ponzi.

A trader using the exchange calls it a massive shit coin casino. The person who asked for anonymity because he was worried that Binance would retaliate and freeze his account said that Zhao deserved credit for recognizing that a big part of the appeal of the coin was speculation. The dumbest parts of the industry were taken by him. The trader says to go buy your Dogecoins and make a lot of money. Jessica Jung said that the company uses a rigorous process to vet its listings. She says that after Terra's collapse, there was an evaluation of how coins were advertised.

The company's approach to shit coins became a key differentiating factor during the company's early days. It offered them a multilevel referral program in which they got a cut of the trading fees of anyone they referred. The company ran contests in which users with the highest trading volumes competed for prizes, while volunteers, known as Binance Angels, promoted the company in Telegram chats. The Angels work for free because they love the community and don't want to make a lot of money. He Yi, the company's chief marketing officer, says that they are similar to priests.

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He, near the old stock exchange in Paris.

Zhao seems to have harbored much broader ambitions almost from the beginning, despite the claims made in the initial coin offering. A former product manager recalls being told in a job interview that the company would want to dominate the market of both cryptocurrencies and stock exchanges. It would have to deal with banking systems and regulation to serve customers who didn't already own coin. The early coiners are okay with offshore, according to Zhao. Average users are the rest of the group. They like a regulated exchange.

In keeping with its more freewheeling ethos, Binance adopted an approach in keeping with its more freewheeling ethos, rather than developing policies that seemed designed to keep US regulators at bay. The company would work to set up regulated local exchanges where users could buy coins with dollars or other national currency.

Regulators in other countries, including the Netherlands, South Africa, and Thailand, objected to the exchange being allowed to operate in their countries. These failures are part of a process of looking at multiple places to try to see which would become more favorable towardscryptocurrencies.

A scattershot business strategy that fueled intense internal rivalries was one of the hallmarks of the UK's chaotic business environment. An executive at one of the subsidiaries said he only discovered the other when he was thanked for hiring someone he hadn't met. The UK teams collaborated, according to Jung. She said that the company's strategy was not scattershot. "It's purposed." The UK's Financial Conduct Authority ordered one of the subsidiaries to stop doing regulated activities and display a notice on its website that it wasn't authorized to do business in the country. It said that it was not capable of being supervised. Since it has nothing to do with the chided British affiliate, the notice was not displayed on the UK site.

He said that his new company would be completely independent and seek to comply with the laws of the US. Forbes reported in 2020 that it had obtained a leaked document describing a bait and switch strategy to draw scrutiny away from the main exchange. The proposal was misrepresented and sued for defamation by Charles Harder, the lawyer who took down Gawker Media.

Forbes stood by its story. He said that the dispute didn't affect his decision to put up $200 million for a stake in the magazine, and that he wouldn't interfere with editorial matters. He didn't know what was in the article. Some people think that the fear that he might be arrested is why he hasn't been to the US in a long time. He said he was avoiding the country so as not to cause a confrontation. He thinks he is allowed in the US. I don't want to give the impression that we're soliciting users there. When he speaks in the US, he does so using a method called zoom.

The SEC is looking into the possible sale of unregistered securities during the last year of the initial coin offering. The relationship between the global exchange and the US arm is under scrutiny. Todd White is the managing partner of a Washington lobbying firm that focuses on Cryptocurrencies. White says that they were just creating exchanges. Anti-money-laundering rules are important, even though you are trying to build something.

In a meeting with executives of the company, White urged them to take compliance more seriously, but they didn't listen. He says that the people were very disrespectful. It's a strategic choice. The cloud cannot be sued. The account is disputed and the company says it takes compliance seriously.

Regulators wanted to know why a big, unregulated exchange was not a problem. "We're not going to educate them and change their minds on that." It is simpler for us to change than it is for them to change.

The company built on skepticism of Wall Street is more centralized than any other financial institution. It's an exchange, a broker, a savings bank, a venture capital investor, a data provider, and a casino. All of them rolled into one. A traditional financial institution is never allowed to be vertically integrated by Zhao's organization.

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Zhao with his Binance tattoo in Paris.

There are potential conflicts of interests in the business model of the company. 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 the listings on the other side of the world. The employees are held to a strict ethical code that forbids short-term trading. She says the company fires people for violating the policy.

The company's history includes at least one hack and several withdrawals being frozen. John Reed Stark is a former chief of the SEC Office of Internet Enforcement. He says that they operate with no fiduciary infrastructure, no consumer protection, and no oversight. When it comes to your finances, it's not what you want.

Many of the criticisms of the company could be applied to the company's competitors. Many of the exchanges have been charged with crimes or securities violations. Sam Bankman- Fried has used his wealth and media savvy to donate enormous sums to Democratic politicians and to recruit endorsements from Tom Brady, Gisle Bndchen, and Steph Curry, but FTX has also bounced among tax. Currently it is located in the Bahamas. After taking a conservative approach in its early years, Coinbase has since embraced shit coins and now lists more than 100 of them. There are guides on the website about how to invest in a shit coin index. Brinance has a similar guide. The price of Bullshit has plummeted.

He acknowledged some mistakes on his company's part and said he's changed his mind over the last year. Binance tried to explain to regulators why an unregulated exchange was not a big deal. "We're not going to educate them and change their minds on that." It is simpler for us to change than it is for them to change.

This point has been hammered home by way of an influence campaign. The proposed Forbes investment looks to have fallen apart as investors have soured on SPACs. Argentina's national club, Italy's Lazio, and Brazil's top-tier league are just a few of the soccer teams that have been sponsored by the company. He equivocated when asked how to square the Musk deal with hiring Harder and lawsuit Forbes. He said that free speech is difficult to define. I haven't spoken to Charles Harder. Our team did a good job of handling it.

He has been on a media kick as part of his new adult-in- the-room phase. His publicists wanted him to give Businessweek a tour of his favorite parts of his hometown. The tour was reduced to a 10-minute drive from one hotel to another in a black Toyota Granvia because of the lack of interest shown by Zhao.

The handler who sat in the third row pressed a button and lowered himself into the knees of the other handler who sat in the first row. That was the only thing I had to do. It was obvious as we drove that if he had a favorite thing about the city, it was the accommodating regulatory climate. It is difficult to see that.

The pivot to conventionality might not be urgent. A reporter could visit the new office after the interview. The office was closed due to a surge in Covid-19 cases after a flurry of emails, calls, and texts. It was odd that no one at the company had heard of the disease. On the previous day, the company arranged a separate interview with the head of Middle Eastern operations, who showed up at a crowded hotel lobby to conduct in-person meetings.

Businessweek was given a virtual tour by a member of the HR team. The offices weren't bustling but they gave the impression that there was activity in them. People only go to the offices a couple of days a week, according to the person. Tan broadcasted the view from her phone as she entered the elevator near the World Trade Centre. She said that they were doing a hot desk system.

She walked through the blue doors. The space inside was large and had a great view of the city. There were bare concrete floors. It was awkward. She said that nobody was coming here. There is another stop. Basically.

The rest of the executive team were moving as well. He flew to France the day after the interview to go to the film festival, and then went to Paris for the summer. He had been enjoying success in Europe, where he received regulatory approval for his company. The possibility of Paris being a home base has been talked about recently.

In the month that followed, he said that the company was hiring for 2000 open positions. He posted a picture of himself giving a hand to an imaginary hire in a busy office. It was welcoming but not authentic. The office is the same as the one on Shutterstock. There was a model and a model's head. Jung says the joke was part of a meta joke, as if Zhao were doing his own joke. More than 50,000 people liked the post.

It is going away and miners are not happy.