Changpeng Zhao's net worth drops by 82% amid Binance regulatory issues
Changpeng Zhao (CZ), the CEO and co-founder of Binance, has experienced a substantial decline in his personal net worth as a result of low trading volumes on the platform. The latest Bloomberg Billionaire Index, released on October 26, indicates a significant drop in CZ's net worth by $11.9 billion, a stark contrast to his $96.9 billion portfolio at the beginning of the previous year. This drop has pushed CZ from his former position as the 11th richest individual in the world to 95th place, with a net worth of $17.3 billion.
On the other hand, Sam Bankman-Fried, the former CEO of the now-defunct crypto exchange FTX, which was a competitor of Binance, has seen his previously esteemed net worth of $16 billion dwindle to zero. Bankman-Fried currently faces both criminal and civil trials for his role in the collapse of FTX in November 2022, an event that wiped out billions of dollars from the market.
The decline in CZ's net worth is closely linked to Binance's 38% drop in trading volumes, a consequence of heightened regulatory scrutiny of digital asset exchanges by both U.S. and global authorities. Bloomberg's calculation of CZ's net worth relied on data from Binance's spot and derivative trading volumes, in addition to fees posted on the platform, using information from CoinGecko and Coinpaprika up to October 2023.
Binance, which boasts a user base of 150 million and holds the position of the largest exchange by trading volume, has experienced a seven-month consecutive decline in market share, even following the demise of its rival, FTX. Several experts attribute this drop in trading volumes to the protracted crypto winter that has affected all segments of the market, resulting in multiple bankruptcies and shortages among crypto miners.
In January 2022, Binance recorded trading volumes that were over 55% higher, following the previous year's bullish trend, which propelled Bitcoin (BTC) to a price point of over $64,000. In more recent times, the exchange has faced legal challenges from regulatory bodies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). These lawsuits accuse Binance of offering trading services related to unregistered securities, improper registrations, co-mingling of user assets, and promoting unregistered derivatives to U.S. markets.
Despite Binance's denial of these allegations, users remain wary of the increasing regulatory scrutiny, further exacerbated by the departure of key executives from the company and its withdrawal from the Russian market. Binance.US, the U.S. arm of the exchange, has also been impacted, with trading volumes falling compared to figures from the previous year. CZ is reported to hold an 86% stake in the U.S. entity. Subsequent to the lawsuits, the firm ceased supporting dollar transactions, which resulted in a $1 billion reduction in CZ's wealth.