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Axios Pro Exclusive Content


SORTING OUT CZ'S BINANCE INFLUENCE

 * Lucinda Shen

Sep 4, 2024
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Photo illustration: Aïda Amer/Axios. Photo: Antonio Masiello/Getty Images

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Binance has barred former CEO Changpeng Zhao for life from running the company,
but he will still have a powerful say in the company as its majority
shareholder.

Why it matters: Binance's November plea agreement with the Department of Justice
left plenty of room for interpretation when it said Zhao had been barred from
"managing or operating" the company.

Driving the news: CEO Richard Teng confirmed to Axios it was indeed a lifetime
ban, offering some more clarity on what Zhao, also known as CZ, is allowed to do
when he completes his jail sentence on Sept. 29.

 * Some original reports of the plea deal, including ours, said he would be
   barred for three years due to language in a DOJ memo.

What they're saying: "CZ, of course, obviously being the largest shareholder,
will retain all shareholder rights," says Teng.

 * "As a shareholder, he will be looking at the performance of the company, and
   if things are not up to what he expects, as an investor, it's always his
   right to replace, nominate a new board of directors, or a new CEO ...
   shareholders can also always table a resolution."
 * Zhao was previously the company's sole board member. Following the plea deal,
   the company has now seven members on its board.
 * Zhao is broadly barred from "day-to-day" activities, a spokesperson said.

Between the lines: His majority shareholder powers still leave significant
questions as to what is considered "managing or operating." Could he act as a
consultant to executives, for example?

 * Zhao appears to have maintained friendly ties with company insiders,
   including co-founder and romantic partner Yi He and Binance executive Tigran
   Gambaryan, who is currently held in Nigeria. The two were among the employees
   who penned letters in support of Zhao ahead of his sentencing.
 * That's where two external monitors, appointed via the plea deal to check for
   compliance, will probably play a role, says Vanderbilt University law
   professor Yesha Yadav. The monitors are expected to watch the company for the
   next three to five years.
 * "The monitor is going to have a big impact in that sense to act as a check
   and balance to support the board and will have discretion when it comes to
   CZ's role as a very important shareholder," she says.

The intrigue: The language of the DOJ's settlement with Binance doesn't appear
to have made the ban a requirement of the plea agreement, notes former federal
prosecutor and Columbia Law School professor Daniel Richman.

 * The ban was instead listed as a "consideration" of the agreement in the
   document.


 * That suggests that the agreement doesn't entirely shut the legal door on his
   return as CEO, and it would be harder for the DOJ to legally pursue should he
   do so.
 * "The bottom line is that a provision could indeed be written that would bar
   Binance from bringing him back, and that would allow the government to claim
   breach if the firm did so. That provision does not appear in the agreement,"
   Richman says.
 * But Binance says in a statement he was "prohibited from any present or future
   involvement in operating or managing the business" under the terms of the
   agreement.
 * The DOJ did not respond to a request for comment.

What next: Following the plea deal, Zhao said he had no intention of being a CEO
of any sort going forward and that he will focus on investing in blockchain, AI,
and biotech companies.

 * "That life no longer exists for me," he wrote of leading Binance in an April
   letter to the court.

The bottom line: The next few years, while under intense scrutiny from U.S.
officials, will probably be pivotal in shaping Binance's relationship with its
majority shareholder.

 * "It's going to be very risky for Zhao to try and start to assert himself,"
   says Yadav. "Notwithstanding the leeway that might be involved in the plea
   deal, it is a tripwire and gives them reason to look at you and [take it as a
   sign] you are falling back to behavior from the past."

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GO DEEPER

 * Rebecca Falconer,
 * Russell Contreras

Updated 27 mins ago - Politics & Policy


DOLPHINS SUPPORT TYREEK HILL OVER POLICE DETENTION AFTER BODY CAM RELEASED

Tyreek Hill #10 of the Miami Dolphins looks on during a preseason game against
the Tampa Bay Buccaneers at Raymond James Stadium on August 23, 2024 in Tampa,
Florida.

Miami Dolphins receiver Tyreek Hill during a preseason game in Tampa, Florida,
last month. Photo: Mike Ehrmann/Getty Images

The Miami Dolphins criticized police for officers' treatment of Tyreek Hill
after body camera footage was released Monday of the receiver being stopped and
detained this week.

The big picture: The Miami-Dade Police Department has opened an investigation
into Sunday's traffic incident that's raised concerns about police use of force
after the MDPD released video showing Hill, who is Black, being dragged from his
car and forced face-down to the ground.

Go deeper (2 min. read)
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 * Rebecca Falconer,
 * Andrew Freedman

Updated 2 hours ago - Energy & Climate


SWELLING WILDFIRES IN CALIFORNIA AND NEVADA FORCE THOUSANDS TO EVACUATE

A resident drives their car packed with belongings as Highway 330 is engulfed by
the Line Fire near Running Springs, California, on September 7, 2024. California
Governor Gavin Newsom and San Bernardino County authorities declared a state of
emergency on September 8.

A resident drives their car packed with belongings as Highway 330 is engulfed by
the Line Fire near Running Springs, California, over the weekend. Photo: David
Swanson/AFP via Getty Images

Fast-moving wildfires in California and Nevada have left tens of thousands of
people under mandatory evacuation orders, numerous structures threatened and air
quality impacted, as a dangerous heat wave grips much of the Southwestern U.S.

The big picture: California Gov. Gavin Newsom activated the National Guard
Monday in response to the massive Line Fire in San Bernardino County — one of
seven large blazes in California and 67 large fires burning across the western
U.S. as of Monday, per the National Interagency Fire Center (NIFC).

Go deeper (2 min. read)
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 * Rebecca Falconer

3 hours ago - Politics & Policy


TUBERVILLE BLOCKS NOMINATION OF AUSTIN AIDE TO TOP ARMY ROLE

Sen. Tommy Tuberville, R-Ala., is seen during senate votes in the U.S. Capitol
on Wednesday, July 31, 2024.

Sen. Tommy Tuberville at the U.S. Capitol in July. Photo: Tom Williams/CQ-Roll
Call, Inc via Getty Images

Sen. Tommy Tuberville (R-Ala.)'s office said Monday he's blocking the nomination
of Lt. Gen. Ronald Clark to a top Army role over concerns about his role in
Defense Secretary Lloyd Austin's hospitalization not being immediately
disclosed.

Why it matters: Tuberville's decision stalls in the Senate weeks out from the
presidential election the promotion of Austin's senior military assistant Clark
as the four-star commander of U.S. Army Pacific forces, per the Washington Post,
which first reported the news.

Go deeper (1 min. read)
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