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Even as he faces jail, Binance founder plans a comeback| GuyWhoKnowsThings


He enjoyed a home-cooked dinner in Montana with a former U.S. senator. She visited Telluride, Colorado, and Moab, Utah, a vacation spot known for its national parks. And she chatted about startups with Sam Altman, CEO of OpenAI.

After plead guilty to a money laundering offense In November, Changpeng Zhao, the founder of the Binance cryptocurrency exchange, did not sit still. A federal judge denied his request to return to his home in Dubai, but Zhao, 47, was free to roam the United States. So he spent the last five months traveling the country, networking with others businessmen and laying the groundwork for his next act.

When he pleaded guilty, Zhao, once the most powerful figure in the global crypto industry, resigned as CEO of Binance and agreed to pay a $50 million fine. Tuesday is scheduled to be sentenced in federal court in Seattle, and prosecutors asked for a three-year prison sentence, while defense attorneys asked for probation and no time behind bars.

But Mr. Zhao, known by the initials CZ, is already looking to the future. He has a fortune of 33 billion dollars, according to Forbesand the Announced Last month it was starting a new web platform to promote online education.

Mr. Zhao has also expressed interest in investing in artificial intelligence and biotechnology, and has corresponded with other executives. Late last year, he and Altman exchanged text messages, two people familiar with the matter said, and discussed the challenges of expanding a startup around the world.

Many powerful cryptocurrency executives have faced federal lawsuits and criminal charges since the multibillion-dollar industry emerged. imploded in 2022. Some have gone to prisonwhile others have enjoyed the good life before arrested. Mr. Zhao's fate is likely to be kinder than most.

His frenetic activity since November contrasts with the consequences he faces Sam Bankman-Frito, the founder of the collapsed FTX crypto exchange. Bankman-Fried, once Zhao's biggest rival, was largely ostracized after FTX imploded in 2022 and prosecutors accused him of stealing $8 billion in client funds. A jury found him guilty of fraud last year and he was sentenced in March to 25 years in prison.

Zhao, who pleaded guilty three weeks after Bankman-Fried was found guilty at trial, still enjoys widespread support in the cryptocurrency industry. Dozens of current and former Binance employees have sent letters to Judge Richard A. Jones, the federal judge overseeing Mr. Zhao's case, asking him to impose a lenient sentence. And many crypto entrepreneurs, investors and dignitaries have continued to support Mr. Zhao, court records show.

A brief stay in prison “is a small price to pay to be a billionaire for life,” said John Reed Stark, a former Securities and Exchange Commission official and critic of the crypto industry. “The industry simply doesn't care about the extraordinary wave of cryptocrime started by people like CZ.”

Representatives for Zhao and OpenAI declined to comment.

For much of Binance's existence, Zhao was dogged by accusations that he had broken the law to build a crypto empire. Binance was the world's largest crypto exchange, processing up to two-thirds of all transactions. And Mr. Zhao became a crypto celebrity, with nearly nine million followers on X. His posts helped set off a chain of events that led to the demise of FTX in 2022.

Last year, Binance faced its own reckoning. The company agreed to pay $4.3 billion to the U.S. government to resolve charges that it allowed criminal activity to flourish on the exchange.

US officials said Binance violated economic sanctions by allowing people in countries such as Cuba, Syria and Iran access to its platform. Zhao failed to establish adequate anti-money laundering controls, prosecutors said, and allowed clients to sign up for accounts without providing basic personal data that financial services companies typically require.

“Zhao violated US law on an unprecedented scale,” prosecutors wrote in a court filing Wednesday. “Zhao's sentence should reflect the seriousness of his crimes.”

Mr. Zhao began talking about his next act the moment the charge against him was announced. in a mail On day X of his plea hearing in November, for which he appeared in person in federal court in Seattle, he said he was interested in investing in areas such as cryptography, biotechnology and artificial intelligence.

“I may be willing to be a coach/mentor for a small number of future entrepreneurs,” he wrote. “At least I can tell them what not to do.”

In a document filed last week, prosecutors said Zhao had traveled throughout the United States, visiting New York, Los Angeles, Telluride and Moab. Mr. Zhao, who grew up partially in Canada, has spent some of his free time skiing and snowboarding, said a person who knows him.

Mr. Zhao met Mr. Altman in person about a year ago, a person with knowledge of the matter said. They were in contact again after a leadership battle on OpenAI in late November, two people familiar with the exchange said. The next month, over hot pot in Los Angeles, Zhao told Ronghui Gu, a computer science professor at Columbia University, that she had contacted Altman.

“He talked to Sam and they both believe that AI will help a lot to update the development of technology and human knowledge,” said Mr. Gu, who founded a new company which Binance helped fund, he said in an interview.

At the same lunch, Zhao mentioned that he was “looking for opportunities” to invest in the large data centers that power AI applications, Gu said.

(The New York Times has defendant OpenAI and its partner, Microsoft, allege copyright infringement of news content related to AI systems).

In a letter filed in court last week, Zhao said he had also spoken to “several biotech startups” in recent months and planned to focus disease prevention in the next chapter of his life.

“I would like to help fund small research laboratories with the goal of curing diseases once and for all, as well as providing medical access to billions around the world using blockchain technologies,” he wrote.

In March, Mr. Zhao Announced at X who was starting a project called Giggle Academy, a free online learning platform for children. “A seven pages”Concepts paper” posted on the Giggle Academy website said the platform would involve artificial intelligence and automation, as well as non-fungible tokens, the unique digital collectibles known as NFTs.

Mr. Zhao wrote on X that Giggle Academy would have “no revenue” and that he was recruiting a small team to work directly with him.

In his travels, Mr. Zhao also met influential acquaintances. A couple of months ago, he had dinner at the home of Max Baucus, former US senator and ambassador to China, in Montana. In a letter filed in court last week, Baucus, who worked for Binance as an advisor, said he and Zhao had discussed the criminal case.

“He made no excuse except to point out that he had not hurt anyone,” wrote Baucus, a Democrat. “He did not use anyone else's funds for his own account, which distinguishes him from Sam Bankman-Fried, who did just that.”

At dinner with Mr. Gu in December, Mr. Zhao was accompanied by his son, a freshman at Pepperdine University. The dinner was largely informal, Gu wrote in a letter to the court last week. He and Mr. Zhao discussed their shared interest in cryptocurrencies, as well as “ideas for being a good CEO.”

Then Mr. Zhao's son asked his father if he was really guilty. “The sudden silence that followed was palpable,” Gu wrote. “He acknowledged his mistakes and his guilt, emphasizing that making mistakes is not something to be ashamed of.”

Mr. Zhao soon lightened the mood, the letter said, cracking a joke about “Mr. Gu's continued willingness to dine with them.”

kitty bennett contributed to the research.




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