Binance Settles for $4.3B; Sam Altman Rejoins OpenAI as CEO
Welcome to this week’s edition of the Myth of Money. If you would like to keep in closer touch, please reach out on X (formerly Twitter) below.
This week was another eventful one in the world of cryptocurrency.
Binance CEO Settles for $4.3 Billion
Changpeng Zhao (CZ), who has been at the helm of Binance since its inception, has resigned as CEO amid the conclusion of a criminal investigation. This dramatic step follows his plea of guilty to violating criminal anti-money laundering requirements. The implications of this plea are profound, not just for Zhao but for the entire cryptocurrency exchange.
As part of the settlement, Binance has agreed to pay a staggering $4.3 billion to the U.S. Government. This penalty is one of the largest in the history of corporate fines by the U.S. Department of Justice. The charges against Binance were severe and included conspiracy, conducting an unlicensed money transmitting business, and violations of the International Emergency Economic Powers Act.
One of the most alarming allegations against Binance was that it allowed entities like ISIS, Al Qaeda, and Hamas to transact on its platform, as stated by the U.S. Government. Following these revelations, the U.S. Government has banned Changpeng Zhao from engaging in or managing Binance operations.
As part of his plea deal with the U.S. Government, CZ is facing a potential 18 months in prison. This development led to a significant reaction from Binance's users, with $1.3 billion being withdrawn from the exchange following the U.S. Government's indictment.
CZ was released from custody on a $175 million bond but is restricted from leaving the U.S. ahead of his sentencing in February. Federal prosecutors have emphasized that Zhao, being a citizen of the United Arab Emirates, has minimal ties to the U.S. and poses a flight risk. They argue that the bond conditions are insufficient to ensure his presence in the U.S. for sentencing, considering his significant wealth and the lack of an extradition treaty between the UAE and the U.S.
Zhao's attorneys have contended that restricting him to the U.S. until sentencing would be a hardship for him and his family, as they are unable to relocate to the U.S. during this period. This case marks a pivotal moment for Binance and the cryptocurrency industry as a whole, underscoring the increased attention and regulatory scrutiny facing the sector.
Sam Altman Rejoin OpenAI as CEO
The drama at OpenAI, the company behind the popular ChatGPT, has been unfolding over the past few days, marked by high-profile resignations, boardroom upheavals, and intense staff reactions.
It all began with the abrupt resignation of OpenAI's Co-Founder and President, Greg Brockman, which followed by the board's decision to fire CEO Sam Altman.
The turmoil within the company escalated when OpenAI staff threatened to quit en masse if the entire board didn't resign and reinstate Sam Altman as CEO immediately. Amidst this internal strife, it was announced that Sam Altman would not return to OpenAI and would be replaced by the former CEO of Twitch.
In a surprising twist, Microsoft, which has heavily invested in OpenAI, officially hired the ex-CEO of OpenAI, Sam Altman, to lead a new advanced AI research team. This move seemed to fuel further unrest within OpenAI, with reports suggesting that 75% of the staff was ready to quit and join Microsoft’s AI team if Altman wasn’t reinstated.
Investors in OpenAI considered legal action against the board following the firing of CEO Sam Altman, adding another layer of complexity to the situation. However, the saga took another turn when OpenAI rehired Sam Altman as CEO, seemingly capitulating to the demands of the staff and certain board members.
The new board of OpenAI saw significant changes, with three new members replacing the previous leadership - Bret Taylor (CEO of Salesforce and board member of Shopify), former US Treasury Secretary Larry Summers, with Adam D’Angelo the only previous board member remaining. The shake-up is notable for its shift from a board with academic and research backgrounds to one with more experience in business and technology.
Satya Nadella, CEO of Microsoft, commented on the need for governance changes at OpenAI. He expressed his encouragement at the recent board alterations, highlighting the importance of stable and effective governance.
The new board of OpenAI is still in the process of being finalized, with negotiations reportedly ongoing to include representatives from major investors like Microsoft. These changes signify a new direction for OpenAI, focusing more on business acumen and less on academic research.
The reappointment of Sam Altman as CEO marks a significant moment in OpenAI's history, illustrating the complex dynamics of power, governance, and the role of key individuals in the rapidly evolving field of artificial intelligence.
This Week By the Numbers 📈
Bitcoin (BTC) and Ethereum (ETH) reach their highest levels in 2023 before experiencing a pullback
Ethereum's open interest sees a significant increase, driven by Time-Weighted Average Price (TWAP) purchasing activities
A U.S. Securities and Exchange Commission (SEC) Commissioner advocates for the approval of a Spot Bitcoin ETF, stating that there is no justification for regulatory hindrance
The Grayscale Bitcoin Trust (GBTC) faces a potential outflow of $2.7 billion if a Spot Bitcoin ETF is sanctioned
Sam Bankman-Fried (SBF), currently incarcerated, reportedly trades Mackerel fish for haircuts and other necessities in prison
Legal proceedings progress to potentially allow the extradition of Terraform Labs' Do Kwon to the United States
The decentralized exchange (DEX) RUNE witnesses a doubling in trading volumes, surpassing its previous all-time high (ATH) for the month
Mt. Gox, the defunct cryptocurrency exchange, suggests that Bitcoin repayments to its creditors could commence in the near future
Top Stories 🗞️
The next president of Argentina will be Javier Milei as his opponent Sergio Massa conceded on Sunday evening, saying "Argentines chose another path." With roughly 87% of the votes counted, Milei has 56% of the tally versus Massa's 44%. The self-described anarcho-capitalist has been supportive of bitcoin, calling it "the return of money to its original creator, the private sector." "We have to understand that the central bank is a scam," said Milei earlier this year when asked about bitcoin. "What bitcoin is representing," he continued, "is the return of money to its original creator, the private sector."Milei to this point, however, has not gone as far as proposing making bitcoin legal tender. He's instead calling to eliminate the country's central bank and dollarizing an Argentine economy that's been walloped by inflation that reached 142% in October.
Crypto firm Tether said on Monday that it had frozen $225 million worth of its cryptocurrency which it said had been linked to a human trafficking group in Southeast Asia. The U.S. Secret Service asked Tether to freeze the tokens during a "months-long investigative effort" by Tether and the crypto exchange OKX, Tether said in a blog post, without giving details about the scope or timescale of the investigation. Tether and OKX collaborated with the U.S. Department of Justice (DOJ) on the investigation, Tether said without elaborating. The crypto tokens were "linked to an international human trafficking syndicate in Southeast Asia responsible for a global “pig butchering” romance scam," Tether said.
Kraken, one of the world's largest cryptocurrency exchanges, was sued on Monday by the U.S. Securities and Exchange Commission, which accused it of illegally operating as a securities exchange without first registering with the regulator. The lawsuit in San Francisco federal court is the latest step in SEC Chair Gary Gensler's push to bring cryptocurrency under his agency's purview, by contending that digital assets are investment contracts subject to federal securities laws. Kraken intends to defend itself, saying Congress should decide how to regulate cryptocurrency exchanges and calling the SEC view of digital assets "incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy." The San Francisco-based exchange also said the lawsuit will not affect its more than 10 million clients. In June, the SEC filed similar lawsuits against Binance, the world's largest cryptocurrency exchange, and Coinbase, the largest in the United States. Both are defending against the regulator's claims.
Elon Musk’s social media company X filed a lawsuit against liberal advocacy group Media Matters for America on Monday, saying it manufactured a report to show advertisers’ posts alongside neo-Nazi and white nationalist posts in order to “drive advertisers from the platform and destroy X Corp.” Media Matters, a Washington, D.C.-based non-profit, called the lawsuit “frivolous.” Advertisers have been fleeing the site formerly known as Twitter over concerns about their ads showing up next to pro-Nazi content — and hate speech on the site in general — while billionaire owner Musk has inflamed tensions with his own posts endorsing an antisemitic conspiracy theory. IBM, NBCUniversal and its parent company Comcast said last week that they stopped advertising on X after the Media Matters report said their ads were appearing alongside material praising Nazis. It was a fresh setback as the platform tries to win back big brands and their ad dollars, X’s main source of revenue.
Netflix gave $11 million to filmmaker Carl Erik Rinsch to produce a sci-fi show. Now, the streaming giant wants its money back after Rinsch wasted the investment on risky stock trading and investments. Netflix burned more than $40 million on Mr. Rinsch’s show and gave him near-total budgetary and creative latitude. However, they say they’ve never received a single finished episode. Now, Mr. Rinsch and Netflix are locked in a confidential arbitration proceeding initiated by Mr. Rinsch. He claims the company breached their contract and owes him at least $14 million in damages. Netflix claims that it owes the former nothing, and in fact, it wired the filmmaker’s production company an additional $11 million, bringing its total outlay to more than $55 million. During the COVID-19 pandemic, Mr. Rinsch transferred $10.5 million of the $11 million to his personal brokerage account at Charles Schwab. Using options, he would risky bets on the stock market.
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About the Author: Tatiana Koffman
Hi there and thanks for reading! If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I write to make financial topics more accessible and create equal opportunity for the next generation of investors. I have personally invested in 20+ companies and funds (👉 my portfolio).