Binance CEO Changpeng Zhao and Coinbase CEO Brian Armstrong lost a combined $1.8 billion when the two companies were sued by the US Securities and Exchange Commission (SEC).
Until last week, 2023 was looking like a great year for crypto billionaires. However, two lawsuits filed by the US Securities and Exchange Commission (SEC) against cryptocurrency exchanges Binance and Coinbase in the past two days have dampened optimism in the market.
According to the Bloomberg Billionaires Index, Binance CEO Changpeng Zhao (CZ)'s fortune has dropped by $1.4 billion in the past two days, to $26 billion. Coinbase CEO Brian Armstrong's fortune has also lost $361 million, to $2.2 billion. The SEC accused the two companies of violating securities regulations, causing the stocks of cryptocurrency-related companies and the prices of many tokens to plummet.
Changpeng Zhao (left) and Brian Armstrong. Photo: Bloomberg
This is the next big thing for crypto billionaires, whose combined fortunes have plummeted in the “crypto winter” of 2022. Last year saw the collapse of a series of names, from stablecoin TerraUSD, venture capital fund Three Arrows Capital to Sam Bankman-Fried’s FTX exchange.
But their fortunes rose by $15.4 billion through last week as Bitcoin and other digital assets rebounded. Zhao’s fortune was up 117% before this week’s decline, while Armstrong’s fortune was up 61%. The billionaires on Bloomberg’s list saw a gain of just 9%.
Bitcoin has surged this year on hopes that the US banking crisis will force the Federal Reserve to halt interest rate hikes. Bitcoin investors have long argued that the digital currency will benefit from a low-interest-rate environment and act as a haven from volatility in traditional finance.
However, the situation could change as US authorities make it difficult for the industry to operate and for Americans to transact.
In a lawsuit filed on June 5, the SEC accused Zhao and Binance, the world's largest cryptocurrency exchange, of defrauding investors and regulators, misusing user funds, and violating securities regulations. Zhao's assets peaked at $96.9 billion in January 2022.
The SEC continued to sue Coinbase on June 6, causing the company's stock to fall 12%. In the 101-page report, the SEC did not accuse Armstrong of wrongdoing. However, the agency said Coinbase violated SEC regulations by allowing users to trade tokens that were in fact unregistered securities.
Armstrong now owns 16% of Coinbase, both directly and indirectly through funds. He also regularly sells Coinbase stock, having sold $27 million worth of stock this year. Coinbase co-founder Fred Ehrsam also saw his fortune drop to $1.1 billion.
Ha Thu (according to Bloomberg)
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