Billionaires: Binance founder sheds $12 billion from net worth

In our fortnightly round-up of the world’s super wealthy, Warren Buffet's Berkshire company is being sued and Australia's richest woman looks set to scupper a second lithium takeover

Binance founder and chief executive Changpeng Zhao's personal fortune hit a peak of $96 billion in January 2022. Reuters

Changpeng Zhao

Sam Bankman-Fried, who was found guilty on Thursday of defrauding customers of his now-bankrupt crypto exchange in one of the biggest financial frauds on record, is not the only cryptocurrency founder feeling the heat.

The Bloomberg Billionaires Index slashed its estimate of revenue at crypto exchange Binance by 38 per cent after data showed volumes at the company declined this year.

That wiped $11.9 billion from the fortune of Binance founder Changpeng Zhao, known as CZ, dropping him to $17.2 billion.

At the time of writing, however, Mr Zhao's net worth had edged up slightly to $18.3 billion, making him the world's 88th richest person, according to the Bloomberg Billionaires Index.

Mr Zhao, 46, played a role in the events that led to Mr Bankman-Fried being charged by federal prosecutors.

In November, the Binance founder announced he was liquidating a token linked to FTX following a report that Mr Bankman-Fried’s hedge fund Alameda Research also owned a large position in it.

FTX customers rushed to pull money and the exchange was unable to keep up with the surge in withdrawals. Less than a week later, it declared bankruptcy.

That sent Mr Bankman-Fried’s own fortune to zero after peaking at $26 billion in March last year.

The index calculates Binance’s revenue using spot and derivatives trading data from crypto-tracking services Coingecko and Coinpaprika.

Binance gained market share earlier this year, peaking at 62 per cent of total on-exchange cryptocurrency trades in the first quarter, thanks to a zero-fee promotion for popular trading pairs.

Once the offer ended, Binance’s share slid to 51 per cent at the end of the third quarter, according to research company CCData.

Representatives for Binance did not respond to a request for comment.

In recent months, the cryptocurrency exchange has found itself increasingly isolated from the traditional financial system.

The Securities and Exchange Commission sued Binance in June, and the Commodity Futures Trading Commission went after it earlier this year for shirking rules that allowed US users to access Binance.

Regulatory officials claimed the company lacked adequate money-laundering controls, inflated trading volumes and mishandled client assets. Binance disputes the allegations and is fighting them in court.

In June, Bloomberg’s wealth index cut the value of Binance’s US exchange to zero after it announced it would no longer transact in dollars, shrinking volumes dramatically.

Binance US had been valued at $4.7 billion in a March 2022 funding round, while Mr Zhao’s net worth hit a peak of $96 billion in January of that year.

The pain has not been confined to Binance, as regulatory uncertainty and rising interest rates make other investments more attractive.

Spot trading volume at Coinbase Global fell by 52 per cent in the third quarter from a year earlier, according to CCData.

Billionaire Warren Buffett's company Berkshire Hathaway is being sued by truck-stop chain Pilot Travel Centers. Reuters

Warren Buffett

Warren Buffett’s Berkshire Hathaway faces accusations it breached the terms of a more than $10 billion acquisition of lorry-stop chain Pilot Travel Centres by changing the accounting methods used to value part of the deal, according to an unsealed lawsuit.

Berkshire originally acquired about 39 per cent of Pilot Flying J – a lorry-stop provider closely held by Cleveland Browns owner Jimmy Haslam and his family – for $2.75 billion in 2017.

The deal called for Mr Buffett to buy a controlling share by this year. The billionaire paid $8.2 billion for another 41 per cent stake in January, meaning he now owns 80 per cent of the business, according to the suit.

The deal also gives the Haslam family the right to sell the remaining 20 per cent of the company to Berkshire on January 1, 2024, using the valuation methods applied to the other purchases.

But the family says Mr Buffett’s lieutenants have changed the accounting rules covering the largest US lorry-stop business, cutting the value of the so-called put right.

Pilot has repeatedly objected to Berkshire’s shift to pushdown accounting rules, according to the Delaware Chancery Court complaint, which was made public last week.

Using those rules works to “unfairly harm Pilot and benefit Berkshire”, the chain’s lawyers wrote.

Debbie Bosanek, a Berkshire representative, did not immediately respond to an email seeking comment on Pilot’s suit.

The deal has paid dividends for the Nebraska-based Berkshire, as the Flying J chain’s 750 locations across the country contributed $9.5 billion of revenue and $83 million in net earnings in the first quarter of this year.

Continued strong second-quarter earnings in August sent Class B shares of Mr Buffett’s conglomerate of transport, utility, energy and insurance companies soaring 3.6 per cent to $362.58 – its highest close ever.

The Haslams contend the accounting change will allow Mr Buffett to “grossly devalue” the remaining 20 per cent of the lorry-stop company.

They are asking a Delaware judge to order him to stop using it as a breach of the acquisition agreement. The family’s estimates on how much value could be lost are redacted in the suit.

The Haslams contend a majority of Berkshire appointees – who now control the chain’s board – have frustrated attempts to jettison the pushdown accounting rules and Mr Buffett has refused to provide assurances the remaining 20 per cent will be valued in the same way as the earlier stakes.

Australian billionaire Gina Rinehart is poised to scupper a second lithium takeover. Reuters

Gina Rinehart

Australia’s richest woman may be set to scupper a second lithium takeover in a matter of weeks, building a major stake in Azure Minerals immediately after the miner backed a A$1.6 billion ($1 billion) bid from Chilean giant SQM.

Gina Rinehart’s Hancock Prospecting said last week that it now held 18 per cent of Azure, slightly short of the 20 per cent level that would require a mandatory takeover offer, but enough to challenge the current bid.

Under the terms of its main offer structure, SQM can pull out if a single shareholder acquires more than 19 per cent of the Perth-based miner – a major hiccup, even if other deal options remain.

Market speculation around Ms Rinehart’s involvement had swirled since SQM’s improved offer went public, driving up interest in the stock.

Earlier in October, the combative iron ore billionaire thwarted a bid for lithium miner Liontown Resources by gradually building a 19.9 per cent stake – ultimately enough to prompt Albemarle, the world’s largest lithium producer, to withdraw its A$6.6 billion offer, even after extended due diligence.

The flurry of deals in the lithium sector highlights the battery metal’s crucial role in the energy transition.

Watch: The Swedish battery maker powering Europe's switch to electric cars

Many newly founded and previously little-known companies in Australia, where lithium mining is dominated by small and medium-sized companies, have surged as a result, as producers vie for a piece of one of the world’s most promising resources.

While her ultimate game plan is still unclear, Ms Rinehart’s lithium gambit highlights the structural challenges on the horizon for iron ore, the metal on which her fortune was built, as demand in China cools.

It remains lucrative for the time being, however. Last Friday, Hancock’s Roy Hill Holdings said the company’s cash flow from operations was A$3.3 billion in the year through to June, much of which was paid out in dividends.

“You can see Hancock has intent to be involved in the lithium industry,” said Matthew Langsford, a portfolio manager at Terra Capital. “There’s going to be greater competition for those assets that appear to have scale.”

Stan Druckenmiller is investing in two-year Treasuries as he becomes more worried about the US economy. Bloomberg

Stan Druckenmiller

Billionaire investor Stan Druckenmiller said he has bought “massive” bullish positions in two-year notes, as he has become more worried about the US economy.

In recent weeks, “I started to get really nervous”, Mr Druckenmiller, founder of Duquesne Family Office, said in a recent interview.

“So, I bought massive leveraged positions” in the short-term notes, he said.

Mr Druckenmiller has joined a number of prominent investors, including Bill Ackman and Bill Gross, in sounding the alarm about the US economy lately.

Mr Ackman, founder of Pershing Square Capital Management, said last month that he has unwound bearish bets on 30-year Treasuries, because “there is too much risk in the world”.

I started to get really nervous, so I bought massive leveraged positions in the short-term notes

Billionaire investor Stan Druckenmiller

Unlike Mr Ackman, Mr Druckenmiller said he is keeping bearish wagers on longer-term bonds because he is concerned about swelling government-debt issuance.

But with the new bullish bets on two-year notes, overall he is long on fixed income for the first time since 2020, he said at a Robin Hood Foundation event in New York.

Mr Druckenmiller, who managed money for George Soros for more than a decade, has been predicting a hard landing for the US economy for some time.

He has said that corporate profits could fall by 20 per cent to 30 per cent, and that the value of commercial property would tumble.

In the interview with Tudor Jones, Mr Druckenmiller said he has observed anecdotal evidence that “on the margin, things are getting softer” as pandemic stimulus is “running down rapidly”.

Historically, the simultaneous increases in interest rates, oil and the US dollar have been negative for the economy, he added.

His paired long-short bond bets means that he is expecting the yield curve to steepen, a move that typically happens when the US Federal Reserve cuts interest rates.

Yields on two-year Treasuries jumped to about 5.3 per cent in October, the highest in more than a decade, as investors absorbed Fed chairman Jerome Powell’s pledge to keep rates high for an extended period.