Mollify 150 million potentially jittery users, placate belligerent US regulators and keep high-profile founder Changpeng Zhao onside. These are just some of the tasks for crypto exchange Binance’s new head Richard Teng.
Teng, 53, succeeded Zhao as the chief executive of the world’s largest crypto exchange after the company and Zhao pleaded guilty to US anti-money laundering and sanctions violations. Zhao, Binance’s founder, stepped down as CEO as part of a sweeping deal to resolve the Department of Justice probe.
Binance will pay $4.3 billion in penalties — one of the largest such agreements in US history — while Zhao will pay a $50 million fine. He faces up to 10 years in prison but is expected to get no more than 18 months under a plea deal.
Taken together, the events are a breathtaking rebuke of crypto’s linchpin exchange and land Teng with arguably the hardest job in the digital-asset sector. He has to rebuild trust in Binance, stem a slide in market share and field ongoing regulatory investigations around the world, including a Securities & Exchange Commission lawsuit that wasn’t part of Tuesday’s settlement.
Work to Do
“There’s a lot of work to be done in radically re-imagining the operating and governance model for Binance, to ensure it can operate in a way that is — and is also seen to be — aggressively pro-compliance, as well as open to incorporating highest standards of good governance and risk management,” said Yesha Yadav, a law professor at Vanderbilt University who specializes in financial regulation.
In the past 24 hours, customers pulled a net $805 million from the Binance platform, according to data from DefiLlama. That’s lower than past daily outflows of as much as $4 billion during times of stress. Binance has $67 billion worth of exchange assets, according to DefiLlama.
BNB, the native token of Binance, dropped about 1.7% to $235 as of 12:14 p.m. in Singapore on Wednesday, extending a near 6% slump from Tuesday. BNB is the fourth-largest crypto coin with a market value of $36 billion, according to CoinGecko, and is often viewed as an arbiter of sentiment toward Binance.
Under the plea agreement, an independent compliance monitor will scrutinize Binance for three years and the company must submit reports to the US government. That’s a perilous backdrop if Teng fails to eradicate the kind of violations for which Binance was just faulted, such as allowing transactions by militant groups like Hamas.
Reassuring Customers
In a post on X, Teng said that he’ll focus on reassuring Binance’s 150 million users about its “strength, security and safety” and collaborate with regulators “to uphold high standards globally.” He added that he would work with partners to drive growth and adoption of web3 — a catch-all term referring to a vision of the internet built around crypto and its underlying blockchain technology.
Teng, a civil servant-turned-crypto executive, was the frontrunner to take over as CEO as regulatory scrutiny of Binance and Zhao intensified across key jurisdictions. Zhao in late May appointed him head of non-US regional markets.
In Teng’s favor is decades-long experience as a senior regulator, including at the Monetary Authority of Singapore as well as the city-state’s SGX stock exchange. He was also chief executive of the regulator at Abu Dhabi’s international financial free zone. Teng joined Binance in August 2021 as Singapore CEO.
Teng “has a respected regulatory background,” said Hirander Misra, chairman and chief executive officer of market infrastructure company GMEX Group. “That said, he is swimming against the tide. A culture of regulatory compliance is very hard to instill in an organization that has evolved in an industry with a lack of regulations. It’s a bit like the poacher trying to turn gamekeeper.”
Recent Exits
Among the issues for Teng is a string of exits by senior Binance staffers in recent months, some of whom had been helping to navigate the regulatory crisis surrounding the company. The departures included counter-terrorism executive Jennifer Hicks, head of product Mayur Kamat, senior vice president of compliance Steven Christie, APAC head Leon Foong and chief strategy officer Patrick Hillman.
“To ensure a bright future, I intend to use everything I’ve learned over the past three decades of financial services and regulatory experience to guide our remarkable, innovative, and committed team,” Teng said in the post on X.
Zhao, who is often referred to by his initials CZ, is prohibited from involvement in managing or operating Binance under his plea agreement. But in a post on X, he indicated he is still willing to offer guidance to Teng.
“As a shareholder and former CEO with historical knowledge of our company, I will remain available to the team to consult as needed, consistent with the framework set out in our US agency resolutions,” Zhao said. He added that he planned to take some time off before looking for startup investment opportunities and exploring crypto’s decentralized-finance sector.
‘Herculean’ Task
Another Binance founder with major clout at the company is Yi He, Zhao’s partner in business and life. The two have children together.
“The question still remains in terms of who is pulling the strings,” said GMEX’s Misra. “I hope for his sake he is given the autonomy to effect serious change to address the Herculean task in front of him,” he added, referring to Teng.
Teng takes on the challenge of retaining customer confidence in Binance amid a partial recovery in digital-asset markets from a damaging 2022 rout that contributed to the blowup of rivals such Sam Bankman-Fried’s FTX. While Binance remains the key platform for crypto spot and derivatives trading, its dominance has declined amid regulatory clampdowns that sapped confidence.
Binance exploded onto the crypto scene in 2017 and saw its market share surge to more than 60% worldwide after the fall of FTX in November 2022. Since then, its combined market share for spot crypto and derivatives has declined to less than 44% this month, according to researcher CCData.
“This criminal and civil resolution allows Binance to potentially start a new chapter,” said Alex Zerden, a former US Treasury official whose firm Capitol Peak Strategies advises crypto businesses. “However, the company will be under rigorous monitorships for the next several years and must show genuine and material changes in behavior to avoid further enforcement actions by the US government.”
--With assistance from Yueqi Yang and Sidhartha Shukla.
(Updates with more details, analysis of the Binance power shift from the first paragraph.)
Author: Suvashree Ghosh, Anna Irrera and Ben Bartenstein
