Changpeng ‘CZ’ Zhao won this crypto war. Is he any better than Sam Bankman-Fried?

The makeover was necessary, Zhao explained over breakfast with Fortune earlier this year, because he was headed to a day of meetings and a cheese-and-wine reception with British lawmakers and business leaders, in a country where Binance was under scrutiny, and legally barred from soliciting clients. Then, Zhao, or CZ as he’s commonly known, pushed up his shirt sleeve to show the Binance logo tattooed on his right forearm: He was still a rebel at heart.

As of last week, you can add another description to Zhao’s complicated public persona: FTX killer.

Amid the implosion of Sam Bankman-Fried’s crypto exchange, Zhao has emerged as the one true victor for now—a spectacular turn of events in under two weeks. FTX’s epic collapse sent the wealth of its founder and CEO—Zhao’s arch-rival—into free fall as $15.5 billion of Bankman-Fried’s wealth evaporated in days. Countless FTX investors and customers have little hope of recovering their funds soon, if ever. On Friday, FTX declared Chapter 11 bankruptcy, and it is possible SBF (to use Bankman-Fried’s moniker) could do prison time in the U.S. for committing wire fraud, if authorities find that he used customers’ money to plug his ballooning corporate debts.

Contrast that to Zhao. Binance’s chief executive is now worth an estimated $17.7 billion (down from $77 billion back in March, thanks to the crypto market’s drubbing in the months since). With FTX obliterated, Zhao’s five-year-old company has for the moment crushed its closest competitor, trading about $13.56 billion of coins and tokens in the latest 24-hour period, in comparison with FTX’s zero.

No heroes in crypto

In every gladiator war, there is a bloodied loser left trampled on the ground. But this battle has also brought a drastic role reversal that is perhaps even more important to Zhao than eclipsing his key rival and business threat.

Until this month, SBF, 30, had cast himself as the responsible straight shooter within crypto’s wild West, cultivating ties with politicians and philanthropists, and bailing out troubled competitors. Raised in China and Canada, Zhao, 45, has seemed an enigmatic outsider to many business leaders, at least in the U.S. He has few deep ties there, and his trading business has regularly been suspected of failing to block sanctioned companies.

Now, the FTX blowout has handed CZ a rare gift: The chance to reframe himself as the leader the industry needs, in order to dig itself out of the morass.

For years, Binance has been under investigation in multiple countries, including the U.S., with authorities accusing it of failing to stop users from laundering money on its platform, failing to establish a fixed operational headquarters, and skirting sanctions laws. Reuters reported earlier this month that Binance has processed about $7.8 billion in Iranian-bought crypto since 2018. The Paris arbitration lawyer Aija Lejniece, who represents Binance users suing the company over a site outage, told Fortune earlier this year she believed CZ used “jurisdiction hopping” as a strategy to shield the company from legal accountability. (CZ told a live Twitter Spaces session on Monday that he had set up “multiple headquarters and offices,” the main ones in Dubai and Paris, “but in a global operational sense we use a distributed workforce.”)

A relationship gone sour

Bankman-Fried was a perfect foil to CZ. At one time, the crypto titans were reportedly friends and confidantes, which added an element of Shakespearian betrayal to the recent drama between the two. (CZ appeared on Fortune Magazine’s cover last April, and SBF was on the August cover.)

CZ: Photograph by Hayley Benoit; SBF: Photograph by Spencer Heyfron

Until the FTX collapse, SBF stood out from the crowd of libertarian, tech-obsessed crypto types. Gregarious and politically progressive, he came across as the nerdy-but-nice guy from your college dorm, with a shambolic mop of curls, and baggy shorts and T-shirts as his business attire. He was the son of two Stanford law professors and was raised in the heart of Silicon Valley, then graduated from MIT with a degree in physics. He ran FTX out of a group penthouse in tax-haven Bahamas—a detail deemed colorful, rather than alarming, until this month.

SBF was also a regular in Washington, where he hobnobbed with lawmakers and high level officials. Bankman-Fried became one of the Democratic Party’s biggest donors, and testified before Senate committees (in jacket and tie) about the industry. He even inked a $135-million FTX naming rights deal for the Miami Heat’s basketball arena. Meanwhile, Zhao’s Chinese heritage made it harder for him to find allies in Washington.

To crypto watchers, one of the many dizzying experiences of the past week has been witnessing the drastic switch-around of two titans whose actions led to the meltdown. “It is a massive thing we have just had,” Jon De Wet, chief investment officer at the Australian digital wealth manager Zerocap, told Fortune on Sunday. “This is the global financial crisis moment for crypto.”

It began Nov. 2, when the crypto news site CoinDesk revealed that much of the $14.6 billion in assets at Bankman-Fried’s trading company Alameda Research was comprised of FTX’s own crypto token, FTT. That prompted CZ to announce on Twitter, to his 7.7 million followers, that Binance it would sell all its FTT tokens, sparking a run on FTX of more than $5 billion. By Nov. 8, Bankman-Fried had no way to cover customers’ withdrawal orders, and called Zhao for help. Zhao offered to have Binance bail out FTX through a fire-sale purchase deal. Just one day later, Zhao walked away from the arrangement, “as a result of corporate due diligence,” he tweeted.

It was not the first time the two men’s fates were intertwined. Launching FTX two years after Binance, SBF’s business rocketed fast, steadily muscling in on CZ’s dominance. Binance invested in FTX, and in public, CZ hailed FTX’s rapid growth as good for the industry. But behind closed doors, Bankman-Fried reportedly fueled suspicions about CZ, in private meetings in Washington, according to sources cited by the New York Times.

Vanquished, SBF admitted to the Times this week that bad-mouthing his rival—whose help he desperately needed in the end—”was not a good strategic move on my part.” It was a bitter breakup. After dumping a big portion of Binance’s FTX holdings, CZ tweeted coldly: “We won’t pretend to make love after divorce.” FTX was as good as dead.

‘Well played; you won”

With investors reeling in the aftermath, Zhao has raced to cement his role as the industry’s adult in the room. He told a packed audience at the Indonesia Tech Summit in Bali last Friday that the industry has been “set back basically a few years,” but that it would emerge stronger in the long run, with fewer, more responsible players—presumably, though CZ did not state it, with Binance as top dog.

But SBF is not CZ’s only detractor. At the Abu Dhabi Finance Week on Wednesday, the prominent economist Nouriel Roubini, CEO of Nouriel Macro Associates, called the Binance chief exec “a walking time bomb” who should be expelled from his Dubai base, and said crypto was “an ecosystem that is totally corrupt.” He later tweeted that Binance had allowed “every sleazy activity to occur on their shady platform.”

On Sunday CZ tweeted he was launching a crypto industry recovery fund—apparently led by himself—to protect investors from blowouts like FTX, and called on others to join his effort. In addition, he told the Twitter Spaces audience that he was “trying to form a global industry association in the crypto space,” which would share companies’ proof of reserves, and enhance “transparency.”

Binance’s chief insists he did not manipulate FTX’s downfall. “I apologize for any turmoil I caused,” he said on Monday on Twitter Spaces. “Even me, I didn’t know they were that insolvent until Sam called me.” Bankman-Fried does not seem to buy that. On Twitter on Friday, he lashed out at his “sparring partner” saying: “Well played; you won.”

Escape from China

Born in small-town China, CZ’s family was relocated to a more rural village during the Cultural Revolution, he told me. His parents were both teachers. “The lifestyle was basic, but we were never out of food,” he said over breakfast in London. “We had a rationing thing: You got a ticket to buy pork. We were not starving, right?”

Zhao’s father finally secured a visa to Canada to study for a Ph.D. in Vancouver, leaving behind his wife, CZ and CZ’s older sister. (CZ was born one year before China’s one-child policy was extended to rural areas.)

Then came the Tiananmen Square massacre in June, 1989. Amid the global outrage, Zhao’s mother seized the moment of openness to Chinese migrants, taking turns with her children to stand in line through the night outside the Canadian Embassy in hopes of getting a visa. “You have to bring a chair, the line moves, you rotate, you take shifts,” Zhao explained. “It took 36 hours.”

At 12, Zhao arrived in Vancouver speaking no English—and never having tasted fresh milk, he told me. He describes his teenage years as a wondrous time, in which he captained the high-school volleyball team for four years, and earned straight A’s in science subjects. He flipped burgers at McDonald’s and pumped gas in overnight shifts at a Chevron station, before studying at McGill University in Montreal.

He later worked in Tokyo, where he built trading software for the Tokyo Stock Exchange, and then worked in New York on trading programs for Bloomberg LP. He finally moved to Shanghai. That fact has nourished questions about CZ’s China links, against which he hit back hard in September. “We have been designated a criminal entity in China,” CZ wrote in a blog post. His sole citizenship is Canadian, and a company spokesman told Fortune on Wednesday that Binance has no office in China.

“Some people insist on calling us a ‘Chinese company,’” CZ wrote, “and in doing so, they don’t mean well.”

“Very persistent”

CZ claims he struggled with his move to China—a country his family had fled decades earlier. “Returning to Asia was tough,” he said over breakfast. “I did not know the business culture and had to learn everything from scratch.”

He describes himself as “a tech guy at heart, and not good at relationships.” Watching the crypto market heat up, he sold his Shanghai apartment for $1 million and poured the money into launching Binance in 2017.

His close friends barely grasped his idea, but gave him the benefit of the doubt. Daming Zhu, a Shanghai venture-capitalist and one of Zhao’s former poker buddies in that city, told Fortune earlier this year that he plowed a million renminbi (about $141,000) into his friend’s crypto startup in 2017, and now regards it as “the best investment I ever made.” At the time, however, he says Zhao’s friends knew nothing about crypto. “None of us understood what he was doing,” he said, “but he was very persistent.”

CZ will need that persistence to ride out crypto’s gyrations. He is keenly aware that FTX’s downfall—in which he had a central part—has shattered investors’ trust in crypto, perhaps for some time. That, he said on the Twitter Spaces session on Monday, is unfair. He complained that media outlets have pilloried all crypto executives in the wake of Bankman-Fried’s collapse—and he drew a contrast to their coverage of Bernard Madoff’s Ponzi-scheme hedge fund, which was cast as being “just his own problem, not the industry problem.”

Rebuilding trust in the industry will be Zhao’s urgent task. But winning back investors’ trust could well mean relinquishing crypto’s free-wheeling, unregulated status—from which he has hugely benefited until now. Last week he promised that Binance will start releasing its “proof of reserves” and called upon others to do the same. He has yet to do so, but in another move to show transparency, Binance did release proof of collateral for its Binance Bridge pegged tokens.

As he tries to step into the vacuum left by SBF, casting himself as the wise leader, it remains to be seen whether investors will be convinced. “We don’t regard other exchanges as competitors,” he said on Twitter Spaces on Monday. “For us, we are more focused on growing the industry.”

Perhaps that is true. But one thing seems clear: FTX’s obliteration is Binance’s gain—with Zhao the gladiator standing atop its bloodied corpse.

The man who killed FTX