Tron and Binance’s budding relationship has started to ignite speculation. Is it a relationship with a hidden agenda? Tron’s CEO Justin Sun, who is also referred to as His Excellency given he serves as Grenada’s Permanent Representative to the World Trade Organisation, has a history of pump and dump and Ponzi schemes. Binance’s CEO, Changpeng Zhao (CZ), has also been making headlines in the wake of FTX bankruptcy after his withdrawal of funds. Is innocent allyship possible between the moguls?
Last week Justin Sun transferred $180 million to Binance. This follows a similar move in December, when Sun tweeted that he deposited $100million into Binance, in an apparent sign of support amidst concerns surrounding Binance’s proof of reserves and mass withdrawals from Binance. These withdrawals followed Zhao’s infamous tweet which led to the downfall of FTX. Partly because of these concerns, Binance’s coin, Binance Coin (BNB), lost 29% of its value in December and saw billions of assets drained from its wallets. An indicator of current investors’ lack of trust in the trading platform.
What is TRON and who is Justin Sun?
TRON is a blockchain-based decentralised digital platform that primarily hosts entertainment applications and has its own cryptocurrency, Tronix (TRX). Founder Justin Sun is well known within the crypto space, being one of the richest crypto figures aided through his connections.
One example is his involvement with the asset management firm Valkyrie. A document seen by CoinDesk revealed Sun is a majority stakeholder in the firm, which pitches crypto investments to Wall Street. In August, the document shows Sun had $580 million stored in Valkyrie, of which Sun was a majority shareholder. This benefitted Sun in other ways, as Valkyrie built investment products for TRON’s tokens TRX and BitTorrent.
The leaked document also shows the continued lack of transparency within the crypto space despite decentralisation and transparency supposedly being at the core of cryptocurrencies.
The Verge reported Sun recently bought citizenship to avoid extradition after the FBI allegedly started investigating him for giving inside information to Chinese traders whilst pumping and dumping assets. There has also been evidence of Sun being linked to Ponzi schemes and involved with Chinese gambling.
Friends in High Places
In 2017, Chinese authorities banned Initial Coin Offerings (ICOs) in a bid to crack down on financial fraud, criminal activity, and pyramid schemes. Investors bought into ICOs theorising the coin’s value would increase. However, in many cases, the coin’s founders immediately sold the coins for huge amounts of money, resulting in the coin’s value decreasing drastically and investments also.
Sun’s company TRON pushed for TRX to finish its token sale a day before the ICO ban came into place, a clear indication that he knew the ban was coming. Which is where Binance CEO Changpeng Zhao comes in. The Verge reported that a former employee was aware that Zhao had tipped off Sun about the upcoming ICO ban, leading Sun to push for TRX token sales. What’s more, after this, Sun immediately jumped a flight to San Francisco in a bid to avoid arrest from officials after the sales.
Zhao commented after the ICO ban about his dealings with Justin Sun: “We have only talked business and haven’t really ‘hung out’ in any way.” However, sightings of Sun and Zhao on holiday together may tell a different story.
In another indication of the close relationship between the two men, Binance has also enabled early listings and promotions for TRX and TRON based tokens. Binance activated support for TRX staking with a minimum deposit of five TRX despite TRX trading for less than 2 cents a time. Binance also ran trading competitions for TRX and BitTorrent with some of the prizes being new cars and Rolex watches. Binance has supported other competitions for coins, of course, but never with such extensive prizes as with TRON.
In 2021, there was apparent strain on their friendship. After initially helping his friend, Zhao condemned Sun after he purchased STEEMit.com, a decentralised social network at the top of the STEEM blockchain.
Following the purchase, Sun was entitled to around $12 million worth of pre-mined tokens on the network. However the STEEM community put in a soft fork, preventing Sun from accessing the money as they did not trust him not to use the tokens to influence the future of the network. But Zhao and other trading platforms including Huobi and Poloniex voted for Sun to override the soft fork and delegated their power to Sun. This resulted in Sun pushing community members out of the network’s elite governing council and putting in new people which the community deemed as controlled by Sun.
In response to the outcry from the STEEM community Binance released a statement addressing the situation: “Binance stays neutral and has no interest in on-chain governance beyond the Binance ecosystem. We hold a supportive position of normal upgrade/hard fork and will continue to do so in the future.
“Hopefully, the STEEM community and TRON will reach a consensus in an efficient manner. If they fail to reach an agreement and it poses potential risks/damages to STEEM users on Binance, we reserve the right to take corresponding actions at the consent of our users.”
Despite this condemnation, Sun deposited $100million into Binance last month as there were vast withdrawals by investors. However, according to blockchain data from Nansen this month, a wallet associated with Justin Sun transferred $100 million worth of stablecoins (50 million USDT and another 50 million USDC) from Binance to Huobi amid insolvency rumours. Sun bought a 100% Stake in Huobi and took an advisory role in October 2022. Last week Sun also deposited a further $180million into Binance.
Arguably, in the current crypto climate, ensuring sustainability of the wider industry may be behind allyship within the space. Zhao commented in a Twitter thread that “no healthy business is destroyed by a tweet” (referencing his tweet which arguably sparked the downfall of FTX) and that he wasn’t going to “support people who lobby against other industry players behind their backs.”
The question is: why would Binance’s CEO, who advocates for lobbying against the likes of FTX’s Sam Bankman-Fried, simultaneously back up Sun, a known Ponzi scammer who is under investigation by the FBI and is regularly on the run?
At the same time, if they are managing their companies and protecting investors, this allyship may not necessarily be a negative thing, providing their core values and focus is actually protecting investors’ funds. Doing so would also mean maintaining the core value of cryptocurrencies – decentralisation and transparency – which so far has not been demonstrated by either of the two CEOs.
Author: Bronwen Latham
#Binance #TRON #FTX #Zhao #Sun