Richard Painter, a University of Minnesota law professor who served in the White House as George W. Bush’s chief ethics lawyer, told me there is no parallel in American history for what we are witnessing. “Corruption scandals have usually involved campaign money going to politicians, from both parties,” Painter said. “This is the first time one has involved the President’s personal businesses and personal money.”
Some of the details leading up to last week’s pardon are murky. But, from reporting by several media outlets, we know quite a bit about the relationship between Binance and World Liberty Financial (W.L.F.), the crypto business that is majority-owned by the Trump family. Zhao was released from prison last September. According to a Bloomberg article, two sources said that, shortly after Trump’s reëlection, Zhao met with the businessman Steve Witkoff, a partner of the Trumps in W.L.F. who later went on to become the United States special envoy to the Middle East, at a Bitcoin conference in Abu Dhabi. (Bloomberg also cited a source close to Witkoff who said that Witkoff doesn’t recall this meeting.) In March, the Wall Street Journal reported that Zhao was pushing for a Presidential pardon, and that representatives of the Trump family had held talks about taking a stake in the U.S. arm of Binance. (At the time, Zhao denied seeking clemency, and no deal materialized.) That same month, W.L.F. announced that it was entering the fast-growing market for stablecoins and creating its own coin, USD1.
Stablecoins are digital money designed to be less volatile than cryptocurrencies like bitcoin. Unlike other digital assets, the value of stablecoins is meant to be backed, one to one, by reserves of safe assets, such as U.S. Treasuries. W.L.F.’s decision to launch USD1 came just before Congress began considering a piece of legislation to establish a regulatory framework for stablecoins, the GENIUS Act, which Trump eventually signed this past summer. And, in rolling out USD1, W.L.F. was looking to compete with established stablecoins including Tether, which was launched in 2014 by a crypto company of the same name, and USDC, which the fin-tech company Circle issued in 2018.
As with any new crypto product, the challenge facing W.L.F. was to get USD1 widely adopted. It got a big break in May, when Binance agreed to accept a two-billion-dollar investment from MGX—a fund controlled by the U.A.E. government—that was paid for using the Trump stablecoin. A spokesperson for MGX told Forbes that Binance asked for the deal to be settled in cryptocurrency, and the parties settled on USD1 because it is “backed 1:1 by a conservative mix of U.S. dollar-denominated assets . . . all held and managed by an independent, U.S.-based custodian in externally audited custodial accounts.” For W.L.F. and its new digital dollar, the transaction was transformative. “The deal caused the amount of the cryptocurrency in circulation to erupt 15-fold and overnight become one of the world’s largest,” the Journal noted. Also, MGX’s purchase of USD1 to close the deal sent a surge of capital to W.L.F., which, as long as Binance held onto the currency, the Trump company could invest in Treasuries and other safe securities to generate returns that Bloomberg estimated at about eighty million dollars a year.
An in-depth investigation by the Times, in September, pointed out that, two weeks after M.G.X. bought into Binance, the White House agreed to allow the U.A.E. to import hundreds of thousands of advanced computer chips that are used to train A.I. models, and which were subject to U.S. export restrictions. The Binance investment raised questions about the motivation of the U.A.E., an oil-rich Gulf kingdom, and about the Trump Administration’s security policies. But the most immediate beneficiary of the transaction was W.L.F. “We thank MGX and Binance for their trust in us,” the World Liberty C.E.O., Zach Witkoff, who is Steve’s son, said at a conference in Dubai.
Binance’s involvement with W.L.F. reportedly went beyond accepting USD1 as a means of payment and holding onto it. Bloomberg, citing three unidentified sources, reported that “Binance wrote the basic code to power USD1.” (A World Liberty spokesperson told the outlet that its report was “factually deficient.” A spokesperson for Binance said it followed “its standard listing process.”) The Journal reported on a partnership between W.L.F. and the crypto-trading platform PancakeSwap that was intended to boost adoption of USD1. PancakeSwap was created in 2020 by anonymous developers, who, according to the Journal, worked at Binance. The article also quoted Trevor Xu, a crypto entrepreneur based in Melbourne, Australia, who said, “The main narrative in the ecosystem is that Binance is supporting USD1.”
