Cryptocurrency richest man CZ turns venture capital firm into giant family office

(Bloomberg) — Changpeng “CZ” Zhao, months out of prison and worth $70 billion as cryptocurrencies continue to rally, is converting his Binance Holdings Ltd.’s former venture capital arm into a family office.

Binance Labs, which manages about $10 billion in crypto-related assets, will change its name to YZi Labs, according to a statement on Thursday. Zhao brought back Ella Zhang, who helped found Binance Labs in 2018 before leaving two years later to run the company. YZi Labs will also manage the fortune of Binance co-founder He Yi, with whom Zhao has three children.

Zhao, 47, has built Binance into a dominant cryptocurrency exchange while insisting it has no global headquarters. His approach to compliance did not sit well with U.S. authorities, who in 2023 charged Binance and Mr. Zhao with failing to prevent cybercriminals and terrorists from trading on the platform. Zhao agreed to pay a $50 million fine, resign as CEO, and was sentenced to four months in prison. He was released in September.

Zhang said in an interview that YZi Labs, named after Binance’s co-founder, is now “purely a family office investment vehicle.” A spokesperson for YZi Labs said the company does not have a formal headquarters because its employees work remotely.

Zhang said there was no immediate need for Zhao to inject more money into YZi Labs. His $69.8 billion fortune ranks 22nd globally on the Bloomberg Billionaires Index, which estimates it is made up entirely of his stake in Binance Holdings.

It’s not entirely unprecedented for a billionaire to convert his business into a family office after running afoul of authorities.

SAC Capital Advisors, founded by legendary investor Steve Cohen, pleaded guilty in 2013 to illegally pocketing hundreds of millions of dollars in profits and enabling a criminal culture of unbridled insider trading. Cohen has always denied wrongdoing but has never been charged or prosecuted, although he agreed not to manage outside money for two years and to convert his firm into a family office.

After being released from a low-security prison in California, Zhao pledged in a post on X to focus on investments that prioritize “impact” over returns. He also said that a new project called Giggle Academy, a non-profit online education platform, will become an important part of his life. By then, Binance had begun severing ties with its venture capital arm.

His new arrangement all but ensures that Zhao will remain a dominant force in the cryptocurrency space.

Prior to the rebrand, Binance Labs invested in hundreds of projects, including Sky Mavis, Aptos Labs, LayerZero, Polygon, and The Sandbox, among others. Its assets mainly consist of tokens issued by projects in which it invests, with a total book value of more than $10 billion, Zhang said.

That could put it ahead of a16z crypto, whose website says it has more than $7.6 billion in “committed capital” across multiple funds. Polychain Capital was founded by Olaf Carlson-Wee and has approximately US$6.7 billion in assets under management as of May 2024. Before first joining Binance, Zhang served as head of investments at Kleiner Perkins for about five years.

YZi Labs’ responsibilities will expand beyond cryptocurrencies and invest in artificial intelligence and biotech companies, the statement said. The company is recruiting experts in these fields and plans to expand its nine-person team to 20 people, Zhang said.

According to Zhang, the company will write checks for $500,000 to $50 million and will also invest in liquidity tokens. Zhao will be closely involved in YZi Labs’ investment decisions and serve as a member of the investment committee with Zhang, she said.

“A lot of founders will naturally approach him,” Zhang added. “So he’s going to be a great sourcing contributor to the team.”

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