Thursday, December 15, 2022

Binance/FTX: The Duality of Man in a Teetering Industry (December 2022)


Binance logo (Image from 


Binance, a cryptocurrency market, tried to bail out FTX, a rival crypto market,

after FTX was found to be misusing client funds. Binance backed out of the deal

after realizing how unethical FTX had been to its customers. This caused a big

crash in the crypto market and sent customers everywhere into a frenzy. FTX

then filed for bankruptcy as the SEC and DOJ started their investigations into

the company. The CEO of FTX was arrested, which shined a light on other

industry heads, specifically the CEO of Binance. Nothing incriminating has

been found yet, but customers are still untrustworthy and have been

withdrawing their balances from the marketplace. Binance put a hold on

withdrawals due to the volume. This has led to further questioning of Binance

by the public. 

Ethics Case Controversy

Binance is the largest cryptocurrency market in the world. Its platform

allows users to buy, sell, and trade crypto tokens online and transact and

earn interest using their tokens. Binance has grown tremendously since

being founded in 2017, handling a total of “$34.1 trillion in trading last

year, even while wrangling with regulators.” (Fortune, 2022)

    The man behind the operation is Chinese-Canadian business executive

Changpeng Zhao. Zhao, a McGill University alumn, was relatively unknown

before becoming “as rich as Mark Zuckerberg virtually overnight.”

(Fortune, 2022) He was ranked as high as 30th on the world’s richest person

list with a net worth of $30 billion, but he has since sunk to 136th with a little

over 13 billion.

    Binance made headlines on November 6th when it liquidated all of its

shares of the FTT token, trading platform FTX’s primary token, sending the

crypto industry into a frenzy. Earlier in the week, on November 2nd, a leaked

report showed that the token's value might be fabricated, and Zhao wanted to

get out before losing value. On November 8th Zhao announced that a deal was

made to save rival marketplace FTX, “one of the largest exchanges for digital

currencies, seemingly on the verge of collapse.” (New York Times 2022) It

appeared as though Zhao and Binance would absorb the second-largest marketplace

and their biggest rival, FTX, and firmly cement their place at the forefront of the

crypto industry. However, not even a day had passed before Zhao put out another

statement explaining that the deal had been scrapped due to how uncomfortable

Binance was with FTX’s financial reporting and suspected them of misusing clients'

funds. On November 11th, as Sam Bankman-Fried resigned as CEO of FTX and

filed for Chapter 11 bankruptcy, Changpeng Zhao spoke to reporters about the

collapse of his rival and what it meant for the industry as a whole, “It's devastating

for the industry. A lot of consumer confidence is shaken. We’ve been set back a

few years.” (CNN, 2022) Zhao compared the collapse of FTX to the 2008 global

financial crisis, saying that FTX would not be the only player to fall, just the first.

    The controversy went quiet for over a month; it was unclear what would happen

in the crypto industry or if Sam Bankman-Fried would even be arrested. However,

on December 12th, “FTX founder Sam Bankman-Fried was arrested by Bahamian

authorities Monday evening after the United States Attorney for the Southern District

of New York shared a sealed indictment with the Bahamian government, setting the

stage for extradition and U.S. trial for the onetime crypto billionaire at the heart of

the cryptocurrency exchange’s collapse.” (CNBC 2022) This arrest and extradition

was the first action from The Securities and Exchange Commission and The Department

of Justice to hold someone accountable for this whole financial catastrophe. This arrest

led to another withdrawal frenzy, just like the one FTX experienced, but this time it

was Binance and other smaller crypto marketplaces that were being withdrawn from.

In the 24 hours following Sam Bankman-Fried’s arrest, “$3 billion in net withdrawals

flowed out of Binance, according to blockchain analytics firm Nansen.” (Forbes, 2022)

This rush of withdrawals caused Binance to temporarily halt the withdrawal of USDC,

a crypto token tied directly to the value of the US dollar. This worried investors at first,

but Zhao assured everyone through a series of tweets that the halt was a part of a

“token swap” due to the increase in withdrawals outside of regular banking hours.

Standard functionality resumed shortly after. In the aftermath of the Sam Bankman-Fried

Scandal, critics have pressured Zhao to be as transparent about Binance’s financials as

he has pushed others in the industry to be. Zhao tweeted that liabilities are difficult to

audit publicly but that Binance does not owe money to anyone. Changpeng Zhao and

Binance are not being as transparent as consumers would like, especially at a time like

this, but only time will tell what will happen to them.



The stakeholders, in this case, include Binance, founder and CEO of Binance:

Changpeng Zhao; FTX, founder and former CEO of FTX: Sam Bankman-Fried; the

Securities and Exchange Commission, The Department of Justice, current and future customers/shareholders, and the general public. Binance would be on top of the

world following this scandal. Their biggest competitor had destroyed themselves, all

they had to do was follow the rules and be transparent, and they would have been set.

However, they made one of the same mistakes they just watched FTX make.

They needed to be more fully transparent with the public. It is not clear what will

happen to Binance in the future, but one thing is for sure, they must regain the

public’s trust. Changpeng Zhao seemed to be a beacon of hope and trustworthiness,

but people are not so sure after his information-withholding tweets about Binance’s

liabilities. Hopefully, he doesn’t follow Sam Bankman-Fried’s path. FTX is all

but dead and buried, they will never be trusted by consumers, and the only course

of action left is for the company to go away forever. Sam Bankman-Fried was a

huge scumbag, not the crypto-guru everyone thought he was. Hopefully, the

Justice Department is harsher with him than they were with the culprits behind

the 2008 financial crisis. The Securities and Exchange Commission has to wake

up and realize how much of a ticking time bomb crypto is a the moment and

adequately regulate it before more scams like this happen. The Department of

Justice has to put the fear of god in the crypto industry and prosecute

Sam Bankman-Fried to the fullest extent of the law. Current/future customers,

shareholders, and the general public have to look at what happened with FTX

and what has already started to get out about Binance and make informed

decisions about whether or not crypto is a wise venture for them. All the

information is laid before them, and they need to put the lust for money on

the back burner and be wise. 

                                            Changpeng Zhao (Image from


From an individualist perspective, Changpeng Zhao was ethically incorrect.

He tried to sink money into a failing company to bail out his rival and save

people’s investments. This does not line up with the individualist belief that

“Business actions should maximize profits for the owners of a business, but

do so within the law.” (Salazar, 17) Buying out FTX was not a decision that

would maximize profit, and even after backing out of the deal, he still did

nothing to capitalize on the situation. He also would not give up information

about Binance’s financials when asked, which is between lawful and unlawful,

because he is deceptive. He could have offered consumers a transfer deal from

FTX to Binance to bring in new customers and increase profits. He could have

been transparent about finances to guarantee he says within the law. In the eyes

of an individualist, Changpeng Zhao was unethical; he was deceptive and did

not act to maximize profits. 


From a utilitarian’s perspective, Changpeng Zhao’s actions were ethically

beneficial and maximized “happiness in the long run for all conscious beings that

are affected by the business action.” (Salazar, 17) Zhao offered to put his bottom

line “on the line” to buy out FTX and help the affected customers. He may have

been motivated by future profit, but his actions were maximizing happiness

nonetheless. Binance’s actions would be lumped in with Zhao’s and seen as

ethically beneficial. FTX’s actions would be seen as unethical.

Sam Bankman-Fried’s actions would be seen as unethical and minimizing happiness.

The SEC and DOJ would maximize happiness for customers/shareholders and

the general public but minimize happiness for FTX, Sam Bankman-Fried, and

arguably the rest of the crypto industry. I believe they would still be viewed as

ethical. The current/future customers, shareholders, and the general public would

come away from the situation feeling net positive about the whole ordeal because

of more awareness and better regulation of the crypto industry.



    Kantianism, developed by Immanuel Kant, an 18th-century philosopher

from Prussia, is a philosophy focused on “the moral permissibility of the action,

as well as the moral worth in the motivation of the action.”(Salazar, 21) The

categorical imperative is the central concept of Kantianism, a test used to evaluate

if an action is morally acceptable. The most basic version of the categorical

imperative is the “formulation of humanity,” which states that actions are morally

unacceptable if people are used as a means to an end. A Kantian would view

Changpeng Zhao as ethically correct because he did not use people as a means

to an end. Sure he has not been as transparent as people would like, but as far

as we can tell, he has not been malicious or used people as a means to an end.

A Kantian would have no issue with Changpeng Zhao’s actions and consider

him ethical. 

Virtue Theory

Virtue theory, developed by the Greek philosopher Aristotle, is a philosophical

tool used to determine “a person’s character and assesses whether a person is virtuous

or not. Is the person getting better in life, flourishing, and fulfilling his or her purpose

in life, or not?” (Salazar, 23). Examine the actions of the person in question and

determine if they match up with particular positive ‘virtues’ or harmful ‘vices.’

This can give you much helpful information about them. There are four main or

‘cardinal’ virtues; courage, temperance, justice/fairness, and honesty. Courage focuses

on standing up for the right things. Changpeng Zhao stood up for the people when

he offered to buy out FTX, so he would be considered virtuous. Temperance focuses

on moderation in action and being realistic. Changpeng Zhao knew it was too risky

to follow through with the buyout and could jeopardize his own company; therefore,

he would be considered virtuous. Justice focuses on suitable products and good practices.

Binance was the most prominent crypto marketplace and offered all the features

a customer could ask for; Zhao would be considered virtuous. Honesty focuses on

being truthful with the general public, your customers, employees, and other

businesses. Changpeng Zhao has not been as open and transparent as the public

would like him to be and would not be considered virtuous. The Virtue Theory

would consider Changpeng Zhao as virtuous overall. 

Justified Ethics Evaluation

After studying the FTX and Binance sides of this case, I am ashamed to have

been so naive when I did my paper on FTX and Sam Bankman-Fried. It is clear

now that he was highly unethical, and I was too scared to condemn him then.

I can’t believe I was against jail time for SBF and the other executives involved.

Regarding Changpeng Zhao, I agree with the ethics evaluation and believe

him to be an ethical person. He is on a slippery slope, though. If he doesn’t

become more transparent and be proactive in conforming to new regulations, he

will get burned as well. Watching this situation unfold in real time as I completed

these reports was unbelievable. I never thought Sam Bankman-Fried would be

brought to justice while I was still working. I hope I am not wrong about

Changpeng Zhao, like I was wrong about SBF. He should be investigated

thoroughly due to his involvement and clean up his act so that consumers

are better protected. I am sure that the proper regulations will be created due

to this fiasco.

                                    Sam Bankman-Fried arrested (Image from


The public can rest easier tonight knowing there was justice in this case;

Sam Bankman-Fried will be punished for his actions. It is unclear who will join

him or what his punishment will be, but the crypto industry will be better regulated;

as a result, further protecting future customers. Unfortunately, only some people are

walking away from this scandal better off than before, but there will be correct laws

going forward. As far as we can tell, the head of the crypto industry still standing

is ethical and a much better person than SBF; hopefully, it stays that way.


Walt, Vivienne. “He Became as Rich as Mark Zuckerberg Virtually Overnight. How Binance Founder 'C.Z.' Zhao

Became a $74 Billion Man While Moving Fast and Breaking Things in Crypto.” Fortune, Fortune, 30 Mar. 2022,

Yaffe-bellany, David, and Erin Griffith. “Crypto World Is Rocked as World's Largest Exchange Rescues Rival.”

The New York Times, The New York Times, 8 Nov. 2022,

Egan, Matt. “Crypto CEO Warns His Industry Faces 2008-Style Crisis, Calls Regulator Scrutiny 'a Good Thing' |

CNN Business.” CNN, Cable News Network, 11 Nov. 2022,

MacKenzie Sigalos, Rohan Goswami. “FTX Founder Sam Bankman-Fried Arrested in the Bahamas after

U.S. Files Criminal Charges.” CNBC, CNBC, 14 Dec. 2022,


Ashmore, Dan. “Is Binance in Trouble?” Forbes, Forbes Magazine, 15 Dec. 2022,

“Changpeng Zhao: Tech Chief in the Eye of the Cryptocurrency Storm.” The Guardian, Guardian News

and Media, 25 June 2022,


“Binance Blog Articles.” Binance Blog,

“SBF Arrested in Bahamas, Set to Be Extradited to Us.” The Crypto Times, 13 Dec. 2022,

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