WEBVTT - Binance Pleads Guilty 0:00:04.440 --> 0:00:12.320 Welcome to tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.360 --> 0:00:15.880 and welcome to tech Stuff. I'm your host Jonathan Strickland. 0:00:15.880 --> 0:00:18.880 I'm an executive producer with iHeart Podcasts. And how the 0:00:18.920 --> 0:00:21.920 tech are you? Now? As we're about to head into 0:00:22.239 --> 0:00:26.920 Thanksgiving here in America, the huge tech news stories just 0:00:27.720 --> 0:00:30.400 won't stop. So earlier this week I talked about what 0:00:30.480 --> 0:00:34.200 happened at open ai and how the board of directors 0:00:34.440 --> 0:00:38.839 fired CEO Sam Altman and how that had massive and 0:00:39.000 --> 0:00:44.960 immediate consequences. There's already another update to that. After being fired, 0:00:45.320 --> 0:00:49.720 Altman reportedly received an offer from Microsoft to become CEO 0:00:49.880 --> 0:00:54.920 of some advanced AI division. But now it is reported 0:00:54.960 --> 0:00:58.560 that he is in line to return as open AI's 0:00:58.600 --> 0:01:02.480 CEO once again. So you know, if you listen to 0:01:02.520 --> 0:01:05.199 the stories, you know that he was fired, the board 0:01:05.319 --> 0:01:08.760 reversed its decision, begged him to come back. He demanded 0:01:09.000 --> 0:01:12.399 that the members of the board stepped down, you know, 0:01:12.440 --> 0:01:14.399 the ones who had voted him out, that they have 0:01:14.600 --> 0:01:16.759 to step down, and they refused, and it went back 0:01:16.800 --> 0:01:19.440 and forth. Well, now it looks like he is on 0:01:19.520 --> 0:01:23.000 track to come back as CEO of open Ai, and 0:01:23.080 --> 0:01:25.080 the board was really kind of forced into this because 0:01:25.120 --> 0:01:27.440 there were a lot of staff members who were ready 0:01:27.480 --> 0:01:31.880 to just walk out if the decision had not been reversed. 0:01:32.319 --> 0:01:35.440 Greg Brockman, the former president of open Ai, who also 0:01:35.760 --> 0:01:39.520 resigned in the wake of that event, is also set 0:01:39.560 --> 0:01:42.600 to return to the company. All of the old board 0:01:43.040 --> 0:01:46.600 of open Ai is now on the outseas, with the 0:01:46.600 --> 0:01:50.080 exception of Adam DiAngelo. He's the sole holdover from the 0:01:50.160 --> 0:01:54.480 board that fired Sam Altman, and he's supposed to be 0:01:54.520 --> 0:01:59.080 there to kind of help with transition this new board 0:01:59.120 --> 0:02:01.120 of directors, which is very small. I think it's like 0:02:01.360 --> 0:02:03.840 three or four people. They're going to be in charge 0:02:03.880 --> 0:02:07.720 of actually creating an expanded board of directors, and I'm 0:02:07.760 --> 0:02:10.000 pretty sure that at least one of those seats will 0:02:10.040 --> 0:02:13.880 be taken by somebody from Microsoft, because, as I mentioned 0:02:13.919 --> 0:02:17.680 in the earlier stories, Microsoft has invested billions into open 0:02:17.720 --> 0:02:23.240 Ai and was mightily miffed that the open Ai board 0:02:23.280 --> 0:02:26.960 made this decision without first talking to its partner. I 0:02:27.000 --> 0:02:30.480 also guess that Emmett Sheer, the former CEO of Twitch 0:02:30.639 --> 0:02:35.040 who was serving as CEO of open Ai, is going 0:02:35.120 --> 0:02:38.000 to count his tenure at the company in hours rather 0:02:38.080 --> 0:02:40.880 than you know, like weeks. Or months or whatever. This 0:02:41.080 --> 0:02:45.079 is a wild story, but that's not what we're here 0:02:45.120 --> 0:02:47.520 to talk about today. We're going to talk about a 0:02:47.600 --> 0:02:50.919 different and equally wild story. We're going to talk about 0:02:50.960 --> 0:02:53.960 a different CEO, one who has played a really important 0:02:54.000 --> 0:02:59.160 part in the crypto community and who yesterday, on November 0:02:59.200 --> 0:03:03.680 twenty first, twenty twenty three, pled guilty to a host 0:03:03.760 --> 0:03:07.679 of charges that include things like money laundering and sanctions 0:03:07.800 --> 0:03:10.920 violations and that sort of stuff, among other things. So 0:03:10.960 --> 0:03:13.280 today we're going to learn a bit about the crypto 0:03:13.600 --> 0:03:18.080 exchange Binance, and it's soon to be former CEO Chong 0:03:18.200 --> 0:03:22.960 Peng Xiao Akacz. In fact, I guess now he really 0:03:23.080 --> 0:03:27.320 is the former CEO. I believe he's already formally stepped down. 0:03:27.760 --> 0:03:30.840 All right, this time last year CZ was coming up 0:03:30.880 --> 0:03:34.800 in the news because of another crypto bro Fond of 0:03:34.840 --> 0:03:41.840 Initialisms SBF aka Sam Bankman freed, and that was when FTX, 0:03:42.240 --> 0:03:46.760 the second largest cryptocurrency exchange in the world, was starting 0:03:46.840 --> 0:03:52.640 to fall apart. Well. CZ's company, Binance was the largest 0:03:52.920 --> 0:03:56.360 cryptocurrency exchange in the world still is, so it was 0:03:56.480 --> 0:04:00.560 number one and FTX was number two. Or a short 0:04:00.560 --> 0:04:03.400 time it looked like Finance was gonna swoop in and 0:04:03.560 --> 0:04:07.120 acquire FTX in an effort to head off catastrophe, but 0:04:07.320 --> 0:04:11.800 then CZ changed his mind, and well, now FTX is gone. 0:04:12.360 --> 0:04:16.359 It's sister company, Alameda Research, is gone. SBF is a 0:04:16.360 --> 0:04:19.200 waiting sentencing after he had been found guilty of multiple 0:04:19.200 --> 0:04:23.440 white collar crimes, and now CZ has pled guilty to 0:04:23.839 --> 0:04:27.720 white collar crimes. It is a wild roller coaster ride, 0:04:27.760 --> 0:04:29.760 and we will touch on all of that a bit 0:04:29.839 --> 0:04:32.760 more as this episode goes on, but first, let's back 0:04:32.839 --> 0:04:36.760 up and just learn a little bit about Finance and 0:04:36.800 --> 0:04:42.280 about CZ himself. His story, in many ways, really exemplifies 0:04:42.360 --> 0:04:47.760 the mythology that perpetuates throughout the tech sphere that, you know, 0:04:47.800 --> 0:04:52.040 a person can come from humble beginnings and then end 0:04:52.160 --> 0:04:54.280 up being one of the richest people in the world. 0:04:54.800 --> 0:04:56.680 You know, at one time, CZ was worth more than 0:04:56.720 --> 0:04:59.920 twenty billion dollars. In order to do that, you might, 0:05:00.120 --> 0:05:04.160 you know, along the way, have to ignore some illegal 0:05:04.240 --> 0:05:08.919 stuff in order to maintain the Disney version of the 0:05:09.040 --> 0:05:12.279 Rags to Richest story, because, as it turns out, a 0:05:12.279 --> 0:05:15.560 lot of billionaires got their billionaire status by doing things 0:05:15.560 --> 0:05:22.039 that you know aren't necessarily legal. So in nineteen seventy seven. 0:05:22.640 --> 0:05:27.120 Cizi was born in the Jiangsu province of China. Both 0:05:27.160 --> 0:05:31.479 his parents were teachers, but China in the nineteen seventies 0:05:31.560 --> 0:05:35.279 and the nineteen eighties was a tumultuous place for people 0:05:35.279 --> 0:05:39.880 who were dedicated to educating others. The Chinese Communist Party 0:05:40.080 --> 0:05:43.000 wanted very much to have a direct hand in how 0:05:43.320 --> 0:05:48.640 China's citizens thought, which meant educators were potentially enemies of 0:05:48.680 --> 0:05:51.680 the state, because it turns out teaching folks how to 0:05:51.760 --> 0:05:56.920 think critically tends to be bad for authoritarian regimes. It 0:05:56.960 --> 0:06:01.600 doesn't work well with their motives oppa, So, according to 0:06:01.600 --> 0:06:05.600 cz his father had been identified as a potentially dangerous 0:06:05.680 --> 0:06:09.280 individual and his family was forced to move to a 0:06:09.360 --> 0:06:14.120 more rural province. On June fourth, nineteen eighty nine, student 0:06:14.240 --> 0:06:19.120 led protests in Tianamen Square in Beijing reached a tipping point. 0:06:19.279 --> 0:06:23.719 After months of demonstrations, the Chinese government deployed troops against 0:06:23.760 --> 0:06:27.720 the protesters and commanded the troops to tell the protesters 0:06:27.760 --> 0:06:31.560 to vacate the square and use force if necessary. Violent 0:06:31.600 --> 0:06:35.840 clashes followed, and a whole bunch of people died in 0:06:35.880 --> 0:06:38.360 the process. To the point where it's often referred to 0:06:38.400 --> 0:06:41.679 as the Tianaman Square massacre. Now, how many people actually 0:06:41.760 --> 0:06:45.080 died is still a matter of conjecture. The Chinese government 0:06:45.440 --> 0:06:48.680 isn't exactly forthcoming with the figures, and in fact has 0:06:48.760 --> 0:06:53.760 tried many different approaches to either dismiss or downplay or 0:06:53.839 --> 0:06:57.920 recontextualize the event. At one point, they even referenced it 0:06:58.000 --> 0:07:03.080 as a vaccination against future political turmoil, which is about 0:07:03.120 --> 0:07:06.880 as chilling a description as I can think of. So 0:07:07.080 --> 0:07:11.280 this environment in China was obviously really dangerous for people 0:07:11.320 --> 0:07:15.840 who were in the education sector. So Cez's family chose 0:07:15.880 --> 0:07:18.080 that to leave China, and a couple of months after 0:07:18.160 --> 0:07:22.840 the massacre, Cz and his mother immigrated to Canada and 0:07:23.040 --> 0:07:28.200 he became a nationalized citizen of Canada. Sez said he 0:07:28.240 --> 0:07:30.720 took several jobs as a teenager to help his mother 0:07:30.840 --> 0:07:35.280 cover family expenses, including working at a McDonald's. So again, 0:07:35.360 --> 0:07:40.360 this plays into sort of that mythology of the tech space, 0:07:40.400 --> 0:07:45.600 where you have people from these pretty humble beginnings reach 0:07:45.800 --> 0:07:49.440 incredible heights. He also dedicated himself to his schoolwork. He 0:07:49.560 --> 0:07:53.080 proved to be adept at mathematics, and he decided to 0:07:53.280 --> 0:07:57.760 enroll in McGill University in Montreal and focus on computer science. 0:07:58.320 --> 0:08:02.240 After he graduated college, Cz took a gig first as 0:08:02.280 --> 0:08:05.960 a subcontractor and he was developing software for the Tokyo 0:08:06.000 --> 0:08:09.400 Stock Exchange. Then he took a job with Bloomberg trade 0:08:09.440 --> 0:08:13.560 Book and was again developing software that was related to 0:08:14.040 --> 0:08:17.200 making trades on stock markets. And in two thousand and five, 0:08:17.280 --> 0:08:19.760 Cz made the decision to head back to China in 0:08:19.800 --> 0:08:23.920 an effort to create tech startups in China itself. So 0:08:24.040 --> 0:08:28.119 for years, China has represented a large and for quite 0:08:28.120 --> 0:08:33.400 some time, largely untapped market. You've got a country that 0:08:33.480 --> 0:08:35.680 has more people than any other country in the world. 0:08:35.760 --> 0:08:39.720 Right there's like one point four billion people in China, 0:08:40.400 --> 0:08:44.880 and so that's an enormous potential market to tap into 0:08:45.040 --> 0:08:49.199 if you can. And it's really tricky, not just because 0:08:49.280 --> 0:08:53.680 the Chinese government is very much an authoritarian presence, but 0:08:53.800 --> 0:08:57.320 also there are international sanctions that you have to deal 0:08:57.360 --> 0:09:00.040 with where other countries have put sanctions upon China, and 0:09:00.640 --> 0:09:02.760 it made it a lot harder to do certain types 0:09:02.760 --> 0:09:06.160 of business. Meanwhile, China went through a phase in which 0:09:06.200 --> 0:09:10.760 the government began to encourage tech companies in particular to 0:09:10.800 --> 0:09:15.720 start business in China, both natively, like encouraging native Chinese 0:09:15.760 --> 0:09:21.160 businesses and to encourage international companies to create a position 0:09:21.320 --> 0:09:24.240 or an office in China, as China was looking to 0:09:24.840 --> 0:09:28.000 not just catch up, but to surpass other countries in 0:09:28.080 --> 0:09:32.000 the tech space. So Cz worked in China for several 0:09:32.120 --> 0:09:34.880 years trying to hit it big with various startups, and 0:09:34.920 --> 0:09:38.080 that's how things went. He built businesses that bridged the 0:09:38.120 --> 0:09:41.000 gap between tech and finance. He continued to focus on 0:09:41.080 --> 0:09:44.440 things like high frequency trading platforms, that sort of stuff. 0:09:44.679 --> 0:09:47.480 And in two thousand and eight, you had a famous 0:09:47.520 --> 0:09:51.000 white paper publish which was called Bitcoin, a peer to 0:09:51.080 --> 0:09:55.240 peer electronic cash system. This introduced the world to concepts 0:09:55.240 --> 0:10:00.280 like blockchain and cryptocurrency. And Cz said he first heard 0:10:00.280 --> 0:10:02.040 about all of this when he was playing in a 0:10:02.160 --> 0:10:05.080 poker game in Shanghai and there was another guy at 0:10:05.120 --> 0:10:07.960 the table, a guy named Bobby Lee, who at that 0:10:08.080 --> 0:10:12.480 time was the CEO of a cryptocurrency exchange company that 0:10:12.600 --> 0:10:17.079 was called BTC China. So Bobby Lee turns to Cz 0:10:17.440 --> 0:10:19.960 in the middle of this poker game and apparently says 0:10:20.360 --> 0:10:23.600 that Cz should really invest like ten percent of his 0:10:23.720 --> 0:10:26.679 wealth into bitcoin because it was going to be the 0:10:26.720 --> 0:10:30.000 next big thing. CZ said that instead of doing the 0:10:30.080 --> 0:10:32.640 ten percent deal. He's like, well, if ten percent is good, 0:10:32.920 --> 0:10:36.000 all of it should be better. So reportedly he then 0:10:36.559 --> 0:10:40.640 sold his apartment and then invested everything he had in bitcoin. 0:10:41.000 --> 0:10:43.120 But at first things did not go so well. The 0:10:43.280 --> 0:10:46.320 value of bitcoin took a hit. Cz saw his personal 0:10:46.360 --> 0:10:49.360 wealth diminish as a result. I want to say that 0:10:49.360 --> 0:10:52.640 that bitcoin's value dropped to just a third of what 0:10:52.760 --> 0:10:55.880 it had been when he made his initial investment, and 0:10:56.440 --> 0:11:00.839 that looked bad. But Cz practiced the old crypto mantra 0:11:01.040 --> 0:11:06.360 of hoddle hodl hold on for dear life and eventually 0:11:06.440 --> 0:11:10.200 saw bitcoin rebound. He also thought that the entire crypto 0:11:10.240 --> 0:11:14.720 community would benefit if it were easier for normal folks 0:11:14.800 --> 0:11:18.320 to get into cryptocurrency, because even in twenty thirteen, which 0:11:18.360 --> 0:11:22.080 is already half a decade after the initial concept of 0:11:22.120 --> 0:11:25.679 bitcoin and blockchain had been unveiled, the folks who were 0:11:25.800 --> 0:11:30.880 into crypto mostly consisted of wealthy folks who were tech nerds, 0:11:31.120 --> 0:11:34.120 or maybe people who had aspirations of being wealthy but 0:11:34.240 --> 0:11:37.760 already were a tech nerd. But outside of that group, 0:11:38.080 --> 0:11:42.880 cryptocurrency was still largely not really understood or known. So 0:11:43.559 --> 0:11:46.440 Cz thought it might make sense to build a more 0:11:46.480 --> 0:11:51.000 accessible platform to allow investors to get into cryptocurrency, and 0:11:51.040 --> 0:11:54.400 that this in turn would benefit the entire crypto community, 0:11:54.760 --> 0:11:58.640 like it becomes a rising tide situation, you have more 0:11:58.679 --> 0:12:03.920 people getting into this and then actually potentially making cryptocurrency 0:12:04.040 --> 0:12:06.040 live up to what it was supposed to be, which 0:12:06.120 --> 0:12:09.760 was a digital means of exchange that would offer up 0:12:09.880 --> 0:12:12.800 opportunities that you just could not realize if you were 0:12:13.040 --> 0:12:16.240 dependent upon stuff like fiat currency. But nor for that 0:12:16.280 --> 0:12:17.960 to work, you got to get people to adopt it. 0:12:18.240 --> 0:12:22.199 If it's just this one small, insular group using the technology, 0:12:22.720 --> 0:12:25.480 it doesn't really go anywhere. So he started to build 0:12:25.520 --> 0:12:27.640 up resources that he would need to launch his own 0:12:27.640 --> 0:12:31.920 cryptocurrency exchange, which he would call Binance. He named it 0:12:32.000 --> 0:12:36.079 after a portmanteau. Essentially he was combining the words binary 0:12:36.640 --> 0:12:40.959 and finance, and he would essentially launch Binance out of 0:12:41.080 --> 0:12:45.480 China in July twenty seventeen. So I guess we need 0:12:45.520 --> 0:12:50.560 to actually talk about what a cryptocurrency exchange is. Essentially, 0:12:50.640 --> 0:12:52.840 it does what it says on the ten. So these 0:12:52.880 --> 0:12:56.120 are businesses that facilitate the exchange of money from one 0:12:56.200 --> 0:13:01.000 form of currency into another. I'll explain more about how 0:13:01.040 --> 0:13:04.720 this happens. But first we need to take a quick 0:13:04.760 --> 0:13:17.480 break to thank our sponsors. Okay, so how does a 0:13:17.520 --> 0:13:22.440 cryptocurrency exchange work? Well, in some ways, it's similar to 0:13:22.920 --> 0:13:27.720 how an establishment, like a currency exchange in a country works, 0:13:27.800 --> 0:13:32.960 except those are offshoots of like nationalized financial systems. But 0:13:33.040 --> 0:13:34.520 you know, you would walk up to one of these 0:13:34.559 --> 0:13:40.000 places and you would exchange your home currency for whatever 0:13:40.040 --> 0:13:42.040 the native currency was. So if I were going to 0:13:43.280 --> 0:13:48.000 the UK, I would be exchanging US dollars for British 0:13:48.080 --> 0:13:51.800 pounds sterling. But in the process, I would also be 0:13:51.800 --> 0:13:57.000 paying a small fee to the institution itself on top 0:13:57.080 --> 0:13:59.800 of this, so I'm not getting a one to one 0:14:00.120 --> 0:14:03.800 value exchange here. I'm losing some because I'm paying the 0:14:03.840 --> 0:14:08.120 institution for the process. Cryptocurrency exchanges are similar, except what 0:14:08.200 --> 0:14:11.400 they're really doing is they're matching up buyers and sellers. 0:14:11.920 --> 0:14:15.200 So let's say that you want to get into bitcoin 0:14:15.559 --> 0:14:17.280 and you're doing it for the first time. You would 0:14:17.440 --> 0:14:20.280 use a cryptocurrency exchange. You would open up an account there, 0:14:20.800 --> 0:14:24.040 create a digital wallet, transfer some of your money into 0:14:24.080 --> 0:14:27.120 this digital wallet. Then you would use the exchange to 0:14:27.400 --> 0:14:32.920 purchase bitcoin from somebody who already holds some and it 0:14:32.960 --> 0:14:35.720 would be at an agreed upon price. Typically the exchange 0:14:35.720 --> 0:14:37.440 handles all of this for you, so you don't have 0:14:37.480 --> 0:14:40.560 to like go through negotiations or anything, and then you 0:14:40.880 --> 0:14:44.600 purchase your bitcoin by quote unquote exchanging your US dollars 0:14:44.920 --> 0:14:49.040 for the bitcoin, and the crypto exchange takes a cut 0:14:49.160 --> 0:14:51.880 of that transaction. There's a transaction fee that goes to 0:14:51.960 --> 0:14:56.120 the exchange itself. Now, these exchanges can and often do, 0:14:56.840 --> 0:15:02.160 have their own cryptocurrency or token associated with the exchange. 0:15:02.280 --> 0:15:06.720 For example, the now defunct ft X exchange had its 0:15:06.760 --> 0:15:12.440 token called FTT. Binance has a unit that is shortened 0:15:12.560 --> 0:15:16.080 down to B and B, but it is called the 0:15:16.120 --> 0:15:20.440 binance coin. There are a few reasons that cryptocurrency exchanges 0:15:20.560 --> 0:15:24.560 could mint their own crypto coins their own tokens. One 0:15:24.600 --> 0:15:27.760 big one is just to raise money. You attract investors 0:15:27.800 --> 0:15:30.760 to your platform and you tell the investors, in return 0:15:30.800 --> 0:15:34.360 for your investment, you will get x number of native tokens, 0:15:34.760 --> 0:15:37.640 and those tokens will be useful in different ways. So 0:15:37.720 --> 0:15:40.560 one of those ways is that can reward those investors, 0:15:40.720 --> 0:15:45.200 obviously just to give them a return on their initial investment. 0:15:45.840 --> 0:15:47.720 But this is somewhat tricky, right, because if you're an 0:15:47.800 --> 0:15:52.000 early backer of a crypto exchange like Binance and you 0:15:52.400 --> 0:15:56.520 get this huge number of binance coins in return for 0:15:56.560 --> 0:15:59.760 your investment, really all you have is a whole bunch 0:15:59.760 --> 0:16:04.760 of right. It's not magically worth anything. I mean, it's 0:16:04.800 --> 0:16:09.720 worth whatever the initial coin offering or ICO says it's worth, 0:16:10.040 --> 0:16:13.240 but it's not pegged to that value. The value can 0:16:13.280 --> 0:16:16.680 actually drop below that ICO. So let's say that bidance 0:16:16.760 --> 0:16:19.800 coin launches with a value of one US dollar per 0:16:19.840 --> 0:16:24.160 binance coin. There's nothing that magically ties those values together 0:16:24.720 --> 0:16:27.360 on their own, So it could be that the binance 0:16:27.360 --> 0:16:31.400 coin falls to seventy cents instead of a dollar. That 0:16:31.440 --> 0:16:33.840 could happen, or it could go up. It could be 0:16:33.920 --> 0:16:37.680 that it suddenly is worth five hundred dollars. So at first, 0:16:37.880 --> 0:16:39.720 it feels like you're being handed a big old pile 0:16:39.760 --> 0:16:42.640 of monopoly money, right, because the bills say they're worth 0:16:42.680 --> 0:16:46.000 certain amounts, But you can't actually spend monopoly money anywhere 0:16:46.520 --> 0:16:49.160 other than in a game of monopoly. But as people 0:16:49.240 --> 0:16:51.760 join the exchange and they put some money into the 0:16:51.800 --> 0:16:56.360 exchange's own currency, either to facilitate trades for other currencies 0:16:56.640 --> 0:16:59.520 or just as an investment, the crypto coin starts to 0:16:59.560 --> 0:17:03.520 take on a value that's determined by the market. So 0:17:04.280 --> 0:17:06.680 let's say that you are an early investor in finance. 0:17:07.320 --> 0:17:11.360 As a result, Binance gives you like a million Binance coins, 0:17:11.920 --> 0:17:15.320 and then after a while your Binance coins are worth 0:17:15.560 --> 0:17:18.200 two hundred bucks apiece. You've now got two hundred million 0:17:18.320 --> 0:17:21.760 dollars worth of Binance coins. That's kind of like how 0:17:21.800 --> 0:17:25.680 these cryptocurrency exchanges get off the ground is just through 0:17:25.720 --> 0:17:29.399 this group hallucination that the token is going to be 0:17:29.440 --> 0:17:32.560 worth something, and maybe it will and maybe it won't. 0:17:32.800 --> 0:17:35.760 It's a gamble. Now. On top of all that, often 0:17:35.800 --> 0:17:39.400 in exchange will also extend certain benefits to people who 0:17:39.680 --> 0:17:44.280 are holding and using the native tokens for that exchange. So, 0:17:44.359 --> 0:17:47.840 for example, if you're using binance coins on Binance, you 0:17:47.880 --> 0:17:51.680 might get a discount on those transaction fees, so you'll 0:17:51.680 --> 0:17:53.760 still have to pay a transaction fee, but it won't 0:17:53.760 --> 0:17:56.399 be as much, so you'll be able to keep more 0:17:56.480 --> 0:18:01.240 of the value associated with that currency change. So in 0:18:01.280 --> 0:18:04.600 a way, it almost becomes something like a loyalty program. 0:18:04.720 --> 0:18:07.840 You can maximize your profits by investing in and trading 0:18:07.920 --> 0:18:11.240 with the native tokens of the exchange. All right, So 0:18:11.320 --> 0:18:15.600 back to binances in particular. So Caz holds this initial 0:18:15.640 --> 0:18:19.000 coin offering, he attracts investors to pour money into supporting 0:18:19.040 --> 0:18:24.120 finance by essentially buying up these tokens, and he launches 0:18:24.160 --> 0:18:28.399 it in the summer of twenty seventeen. However, that was 0:18:28.480 --> 0:18:31.119 around the same time that the Chinese government was starting 0:18:31.160 --> 0:18:35.560 to grow really leery of cryptocurrency. Now you could argue 0:18:36.119 --> 0:18:40.440 this was China being stereotypically suspicious of any entity that 0:18:40.520 --> 0:18:43.520 the government did not have direct control over, and so 0:18:44.119 --> 0:18:46.600 they treated it like it was a potential threat to 0:18:46.640 --> 0:18:50.800 their authority. If the Chinese government can't control it, then 0:18:51.040 --> 0:18:53.560 there's always the possibility it could grow to a point 0:18:53.640 --> 0:18:57.200 that means it could defy the Chinese government. Now, you 0:18:57.240 --> 0:19:00.000 could also say that the Chinese government saw the potent 0:19:00.480 --> 0:19:03.879 for cryptocurrency to be the funding mechanisms for all sorts 0:19:03.920 --> 0:19:08.160 of illegal activities, and that could include things like money laundering, 0:19:08.640 --> 0:19:13.840 funding terrorist organizations, all this kind of stuff, And there's 0:19:13.840 --> 0:19:16.080 a legitimate argument for that. In fact, that's part of 0:19:16.119 --> 0:19:20.679 what the Binance has pled guilty to have done. But 0:19:20.720 --> 0:19:23.080 however you want to frame it, China began to pass 0:19:23.160 --> 0:19:27.080 more and more restrictive laws that essentially were muscling crypto 0:19:27.119 --> 0:19:29.879 companies out of the country. It was becoming harder and 0:19:29.920 --> 0:19:33.800 harder for them to do business in China, particularly with 0:19:34.040 --> 0:19:37.280 the level of freedom that they needed to operate in 0:19:37.480 --> 0:19:40.880 if they wanted to grow. So Cz chose to have 0:19:40.920 --> 0:19:45.399 a change of venue and he relocated the headquarters for Binance, 0:19:46.000 --> 0:19:49.639 and what would follow was a kind of global game 0:19:49.720 --> 0:19:54.399 of hopscotch. Cz would pull up roots and relocate Binance's 0:19:54.480 --> 0:19:57.439 headquarters to a different country. Then he would do it 0:19:57.480 --> 0:20:00.280 all over again once that new country became and to 0:20:00.320 --> 0:20:04.200 pass more regulations around cryptocurrency. So he went from China 0:20:04.320 --> 0:20:07.679 to Japan, then he went from Japan to Malta. Then 0:20:07.720 --> 0:20:11.080 he went from Malta to the Cayman Islands. You'll often 0:20:11.119 --> 0:20:15.399 hear that Binance's headquarters are quote unquote offshore here in 0:20:15.440 --> 0:20:19.080 the United States, because there is a US branch of Binance, 0:20:19.520 --> 0:20:23.640 but the actual main company of Binance is always referenced 0:20:23.640 --> 0:20:26.880 as being offshore, and that's partly because the company has 0:20:26.920 --> 0:20:29.639 been rather fleet footed when it comes to making tracks 0:20:29.640 --> 0:20:32.720 when regulations start to pop up. Well within a year, 0:20:33.280 --> 0:20:37.160 Binance became the largest cryptocurrency exchange as far as trading 0:20:37.240 --> 0:20:41.040 volume is concerned. So twenty eighteen, it already had made 0:20:41.040 --> 0:20:44.919 a name for itself. In twenty nineteen, Binance launched a 0:20:45.040 --> 0:20:50.440 stable coin backed by the US dollar called Binance USD. Originally, 0:20:50.480 --> 0:20:54.600 the Binance coin was trading on the Ethereum blockchain, but 0:20:54.680 --> 0:20:59.720 in twenty nineteen, Binance migrated all of its tokens onto 0:20:59.760 --> 0:21:04.000 its own blockchain, called the Binance Chain. That year also 0:21:04.400 --> 0:21:08.160 saw a big problem. Binance was the target of hackers, 0:21:08.680 --> 0:21:12.080 so some hacker or hackers were able to siphon a 0:21:12.119 --> 0:21:17.000 way around seven thousand bitcoin from the exchange as a whole. Now, 0:21:17.040 --> 0:21:20.600 in twenty nineteen, that amount of bitcoin had a value 0:21:20.640 --> 0:21:24.040 of somewhere in the neighborhood of forty million US dollars. 0:21:24.040 --> 0:21:29.280 That's a pretty big bank heist. Binance ultimately covered all 0:21:29.359 --> 0:21:33.160 the losses. The company had already established a fund specifically 0:21:33.200 --> 0:21:37.240 for those kinds of emergencies. Cz had that foresight. He 0:21:37.359 --> 0:21:40.080 knew that there needed to be a safety net there 0:21:40.240 --> 0:21:45.040 because cryptocurrency is inherently risky for various reasons. This was 0:21:45.080 --> 0:21:48.600 a reminder, in fact, that cryptocurrency is not inherently safer 0:21:48.640 --> 0:21:52.000 than other forms of currency. It's different, but it's not 0:21:52.040 --> 0:21:55.359 necessarily better, at least not when it comes to things 0:21:55.400 --> 0:21:59.959 like risk. Then Binance launched its own smart chain or 0:22:00.080 --> 0:22:03.800 smart blockchain if you prefer so. The initial Binance chain 0:22:04.400 --> 0:22:07.439 was a pretty straightforward and simple blockchain, so it allowed 0:22:07.440 --> 0:22:12.920 for stuff like transaction validations and overall governance of the blockchain. 0:22:13.200 --> 0:22:17.240 But the smart chain that Binance launched carried the capabilities 0:22:17.240 --> 0:22:21.600 of supporting smart contracts. Now, smart contracts are a technology 0:22:21.600 --> 0:22:24.600 that allows for all sorts of different implementations on the 0:22:24.600 --> 0:22:28.240 blockchain that have really yet to be realized in a 0:22:28.280 --> 0:22:32.280 way that has been seen as practical, but it allows 0:22:32.280 --> 0:22:35.320 for stuff like NFTs. NFTs are built on top of 0:22:35.400 --> 0:22:38.760 smart contracts, and they can only exist on blockchains that 0:22:38.880 --> 0:22:42.160 have that support for them. So Binance launches its own 0:22:42.320 --> 0:22:47.280 smart blockchain technology. This also allowed Binance to provide an 0:22:47.280 --> 0:22:52.760 alternative to Ethereum, which was really the premiere smart blockchain solution. Like, 0:22:53.359 --> 0:22:57.000 when you say smart blockchain, you don't necessarily just mean Ethereum, 0:22:57.480 --> 0:23:01.080 but practically that's what a lot of people did mean 0:23:01.200 --> 0:23:04.080 when they talked about smart blockchains. They were talking specifically 0:23:04.119 --> 0:23:07.960 about the Ethereum blockchain. Because it supported those kinds of transactions. 0:23:08.480 --> 0:23:11.199 It also complicates matters when it comes to things like 0:23:11.280 --> 0:23:15.040 discussing NFTs in a way that is genuine and meaningful 0:23:15.200 --> 0:23:18.600 and accurate, because one of the arguments about NFTs is 0:23:18.640 --> 0:23:22.160 that you can move them to other blockchains and they 0:23:22.160 --> 0:23:26.919 will remain relevant. And that's only true if the blockchain 0:23:26.960 --> 0:23:29.800 supports smart contracts in the first place, and even then 0:23:29.840 --> 0:23:33.679 it gets tricky to migrate stuff, but that's for another 0:23:33.840 --> 0:23:38.840 podcast entirely. Binance also offered lower transaction fees and faster 0:23:39.000 --> 0:23:42.679 transaction speeds than you could find on ethereum, so you 0:23:42.720 --> 0:23:45.840 could say that Binance was trying to drink Ethereum's milkshake 0:23:46.200 --> 0:23:48.840 in some ways. Now this leads up to a point 0:23:48.840 --> 0:23:51.600 where the US government begins to pay a bit more 0:23:51.640 --> 0:23:56.199 attention to cryptocurrency in general and Binance in particular. For 0:23:56.280 --> 0:23:58.679 a few years, the crypto world was operating kind of 0:23:58.680 --> 0:24:01.520 like the wild West. There were very few laws and 0:24:01.600 --> 0:24:04.040 regulations that could get in the way, and there were 0:24:04.080 --> 0:24:07.680 lots of opportunities to make money and to grow, and 0:24:08.280 --> 0:24:11.639 even more opportunities if you weren't terribly picky about, you know, 0:24:12.240 --> 0:24:15.280 operating in a legal way and that kind of stuff. 0:24:15.280 --> 0:24:17.560 If you weren't if you didn't mind getting your hands dirty, 0:24:17.600 --> 0:24:21.199 you could grow real fast in the crypto world. But 0:24:21.280 --> 0:24:26.880 in twenty twenty, Forbes published an article that essentially implicated 0:24:26.960 --> 0:24:31.560 cz As building a business that was specifically structured to 0:24:31.720 --> 0:24:37.399 deceive US regulators while still profiting from US based investors. Essentially, 0:24:37.440 --> 0:24:42.320 they were saying cz was designing Binance to confound US 0:24:42.440 --> 0:24:48.400 regulators and keep the business from being restricted by regulations 0:24:48.400 --> 0:24:53.160 and laws. The US government moved to investigate Binance, specifically 0:24:53.240 --> 0:24:56.160 looking into the possibility that finance was guilty of things 0:24:56.240 --> 0:25:00.159 like tax avoidance as well as money laundering. A lot 0:25:00.160 --> 0:25:04.760 of this came down to the differences between Binance dot Us, 0:25:05.720 --> 0:25:10.639 the United States face of Binance, which was supposed to 0:25:10.680 --> 0:25:14.720 operate within the laws and regulations of the United States, 0:25:15.359 --> 0:25:20.199 and Binance overall right like so, Binance Overall operated with 0:25:20.960 --> 0:25:25.440 far fewer restrictions, but investors in the United States were 0:25:25.440 --> 0:25:29.320 supposed to be interfacing with Binance dot Us, which was 0:25:29.359 --> 0:25:33.879 supposed to be the more tame and legal version of Binance. 0:25:34.280 --> 0:25:40.439 The investigation uncovered information that implicated Binance as allowing certain 0:25:40.560 --> 0:25:45.919 US investors to engage with the more untame, wild and 0:25:46.040 --> 0:25:49.720 wooly version of Binance, in other words, to operate without 0:25:50.160 --> 0:25:53.560 obeying those regulations and laws, which was a huge no no. 0:25:54.160 --> 0:25:57.680 Cz at the time maintained that the investigation was unwarranted. 0:25:57.960 --> 0:26:02.960 He said, this is all totally baseless, and we will 0:26:03.000 --> 0:26:06.959 come out proving that Binance hasn't done anything illegal and 0:26:07.000 --> 0:26:10.440