Crypto billionaires have been hit hard by the Securities and Exchange Commission’s crackdown on Binance and Coinbase, incurring huge losses so far this week.
Binance CEO Changpeng Zhao, known as CZ, has seen his net worth shrink by $1.4 billion to $26 billion, while Coinbase CEO Brian Armstrong has seen his net worth drop by $361 million to $2.2 billion, according to the Bloomberg Billionaires Index.
This marks a reversal in fortune for crypto’s wealthiest founders, who saw their combined net worth increase by $15.4 billion in 2023 from the comeback in the price of Bitcoin and other digital assets.
Specifically, Zhao’s fortune was up by a staggering 117% before this week’s decline, while Armstrong’s was up by 61%.
By comparison, the other billionaires on Bloomberg’s wealth index were up a combined 9%.
Bitcoin’s partial comeback this year was largely due to the expectations that the decreasing inflation as well as the US banking crisis that erupted in March would lead the Federal Reserve to hit a pause on rate increases.
That is because lower interest rates can stimulate economic growth and may lead investors to seek higher returns from riskier assets such as cryptocurrencies and stocks.
However, this may not matter if US regulators make it harder for the industry to operate or make it difficult for Americans to trade.
SEC Files Charges Against Both Binance and Coinbase
The commission filed 13 charges against Binance and its US affiliates, ranging from allegedly operating as an unregistered exchange to offering unregistered securities.
The regulator also levied similar charges against Coinbase, claiming that it operated as an exchange, broker, or clearing agency without the required registrations.
The lawsuit against Coinbase came after the SEC sent a “Wells notice” to the company in March, threatening the crypto exchange with legal actions regarding some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
In response to the complaint, Senator Cynthia Lummis lashed out at the SEC, claiming the agency not only failed to provide a path for crypto exchanges to register but also failed to provide legal guidance on what constitutes a security.
“The SEC’s continued reliance on regulation by enforcement continues to harm consumers,” she said, recommending that the agency instead create a “robust legal framework that exchanges can comply with.”
Meanwhile, in an interview with CNBC Squawk Box shortly after the agency announced charges against Coinbase, SEC Chair Gary Gensler said crypto firms need to be compliant with securities laws.
The Securities and Exchange Commission (SEC) filed lawsuits against Binance and Coinbase in June 2023, alleging that both companies had violated securities laws. The lawsuits have had a significant impact on the fortunes of the crypto billionaires who founded and run these companies.
Binance CEO Changpeng Zhao, known as CZ, has seen his net worth shrink by $1.4 billion to $26 billion over the past two days, according to the Bloomberg Billionaires Index. Coinbase CEO Brian Armstrong’s net worth has slumped by $361 million to $2.2 billion.
Other crypto billionaires who have seen their fortunes decline include Sam Bankman-Fried, the CEO of FTX, who has lost $1.1 billion; and Mike Novogratz, the CEO of Galaxy Digital, who has lost $600 million.
The SEC’s lawsuits have raised concerns about the regulatory future of the cryptocurrency industry. If the SEC is successful in its lawsuits, it could set a precedent that could make it more difficult for other cryptocurrency companies to operate in the United States.
The lawsuits have also had a negative impact on the prices of cryptocurrencies. Bitcoin, the world’s largest cryptocurrency, has fallen by more than 10% since the lawsuits were filed.
It remains to be seen how the SEC’s lawsuits will ultimately play out. However, it is clear that they have had a significant impact on the crypto billionaires who founded and run these companies.