Tina Nguyen: Just to illustrate the scale of how unusual this pardon is — was CZ’s conviction on par for other high-profile crypto crimes?
Elizabeth Lopatto: He's such an important part of the crypto ecosystem and foundational to it. The allegations in the indictments were pretty damning and also very funny. Like, if you go back and read the indictment, they are hysterically funny. Some of the stuff that's being quoted from their messaging apps is unbelievable. It looked like an open- and- shut case, based on how much happened just in plain text and based on how much they had in plain text. And also, they had two CEOs of the American arm [of Binance] testifying against him! Remarkable stuff.
Then he gets this relatively short sentence, and the judge, in reading out his sentence, talks a little bit about his extraordinary cooperation with the government. The prosecutors talk about it. So it's kind of like, damn, what did you give up? I imagine that there's national security intel in the data the government got a hold of and found useful. That all seems normal to me. It is not uncommon for someone who has an indictment hanging over them, if they have enough money, to start negotiating. And we saw that with the people in FTX who ended up cooperating with the government against Sam Bankman-Fried. I think Caroline Ellison also got jail time, but only at least a couple months, which is roughly what CZ got, too.
Of course, the government wants to incentivize people to cooperate — one, because they may have other fish to fry, and whatever stuff that might be helpful to them is going to be helpful to them. And two, because it saves them a ton of resources versus having to run an actual trial. CZ did actually serve his time, which, like, good on him, man.
The part that is remarkable to me is the pardon, because we know that the Trumps are really involved in crypto. I believe that they were in a partnership with a trading platform that had been administered by Binance.
That’s a relationship I want to discuss more: the Trump family has a lot of leverage over major crypto interests, because Trump’s either pardoned or dropped charges against some of their biggest whales. Justin Sun and his tumultuous relationship with Eric Trump comes to mind. But when we were talking earlier, you said that CZ probably has way more leverage over the Trump family’s crypto ventures than I would have initially expected. Could you elaborate more on that?
Binance is a major force in this space. Just look at how much trading happens on Binance, and separately, their partnership with the Trump crypto venture, where Binance is effectively administrating their platform. But CZ is someone who is very respected in the crypto space, someone who is relatively powerful, reputationally. And so, having someone like that in the Trump sons’ corner benefits them — not just in terms of any future deals they may be making, but also in terms of giving them credibility in crypto, because CZ is generally presented as being a true believer. One of the things that I think is underappreciated by the public at large is that a lot of the crypto world really did not like Sam Bankman-Fried. He was viewed as a Wall Street guy who was just coming in to make money and not a real crypto guy. That's one of the reasons they were also fast to turn on him, in contrast to Zhaoou, who's viewed as a pillar of the crypto community, if you will. Nobody questions his devotion to crypto's cause. So that in and of itself is interesting.
It makes him an interesting ally for the Trump family as they get further into crypto. That's a fairly powerful person to have in your corner. On top of that, Binance hired this lobbyist, Charles McDowell, who's a friend of Donald Trump Jr. So I think that probably also helps.
What exactly does getting a pardon mean for CZ’s ability to move around the world and make money? He’s served his time. He seemed like he was pretty cooperative, he was already out in the world, but now it’s like he never committed a crime.
I can't speak to what all of this means in other countries, in part because I have American tunnel vision. But in America, we're pretty punitive about felons. There are a lot of things that felons can't do, especially financially. CZ had to step down as CEO of Binance, and if you go look at the plea agreement, you'll see that there are some conditions he agreed to. And I am curious about whether a pardon removes those conditions, because I imagine this guy, being who he is, wants to run his company. Y’know, he founded it. It's been a tremendous source of money and power for him. I'm sure he wants it back.
Oh.
If the pardon does remove some of the penalties that the US places against people with felonies, that is important for CZ, because some of those things are really important for having a job in finance. As we see crypto getting closer to touching actual banks and trying to mainstream itself, that pardon puts CZ in a position that he needs to be in to begin handling money.
The thing that's worth keeping in mind is that when it comes to finance, American law applies everywhere the US dollar goes. So as long as finance is doing anything with US dollars, American law matters. And, of course, a lot of what finance is doing involves dollars because dollars is one of the preferred currencies. I think removing whatever impediments might be there for him to interact with the American financial system makes it much easier for him to interact with Binance.
If we're talking about tunnel vision, I’ve always noted that Washington people express a really limited understanding of what a bribe is. Like, there are so many ways that one could benefit financially that’s well beyond “me just giving money to someone else.”
I mean, I think that the reason DC thinks in that narrow way, is because otherwise they have to admit that there are an awful lot of people, and not just Republicans, who arguably are bought and paid for by a number of industries. If you take a broader view of what you think about bribing is — if you think of it as influence, if you think about it as “getting certain laws done” — that really opens up a lot of things to be bribes.
I’ll give you a specific example. Many years ago, when I worked at Bloomberg, I talked with billionaire Carl Icahn about why he kept trying to move his companies to North Dakota. And the reason was that he had essentially bought a set of laws there that were particularly friendly to activist investors. He talked to me about it. He was very proud of those laws. And he did it in an entirely above-board way. I'm not accusing him of having done anything improper here: he spoke with lobbyists, spoke with assorted people in North Dakota, and eventually this slate of laws got passed. But that is the level of influence that you can have on politics if you have enough money. And it's a level of influence that isn't available to the average voter.
Maybe DC people don't think of that as being bribery, per se, because if you think of it that way, then just about everybody who's employed as a lobbyist is effectively engaged in bribing people. Again, I don't want to accuse anybody of having done anything that is necessarily illegal, but we as a society have decided that this is fine. Trump is exploring the outer limits of that, maybe to the point at which one thinks that certain kinds of laws would come into play.
We could change that if we wanted to. But I think it is spectacularly difficult to change. Because the people who would want to change it are the people who don't have any money and can't buy their law.
