(Bloomberg) — One of the Trump family's cryptocurrency projects received crucial help from the world's largest digital asset exchange, whose founder is a convicted felon and is currently seeking a presidential pardon.
Binance wrote the underlying code to operate USD1, a stablecoin launched by World Liberty Financial Inc. of the Trump family, according to three close sources. They requested anonymity because the agreement is private.
Later, the founder and main owner of Binance, Changpeng Zhao, publicly stated that he had applied for a pardon. CZ, as he is commonly known, pleaded guilty in 2023 for failing to maintain an effective anti-money laundering program.
The programming work — writing the "smart contract" governing how USD1 tokens are created — has enabled USD1 to be used in a $2 billion transaction this spring when an investment company established by the UAE used it to buy shares in Binance.
Currently, more than two months after that transaction, over $2 billion USD1 — about 90% of the total coins in circulation — remain in Binance's wallet, according to blockchain data. The assets backing that amount generate interest income, potentially amounting to tens of millions of dollars annually for the Trump family. Binance has also promoted USD1 to its 275 million users, a benefit sought after by stablecoin issuers.
In summary, blockchain data, public announcements, and accounts from informed sources indicate that Binance helped create this coin, promoted it, and participated in its largest known transaction. It remains unclear whether Binance or Zhao received any payments from World Liberty.
A spokesperson for Binance did not answer questions about programming support or investment agreements but stated that USD1 had complied with the exchange's "standard listing process." She noted that Zhao is no longer an executive at Binance, stating that his decision to seek a pardon "is a personal decision" and directed questions about the matter to Zhao. Zhao has not responded to messages requesting comment.
A White House spokesperson declined to comment on this article. A spokesperson for World Liberty did not answer specific questions about the company's transactions with Binance but stated in an email that "his claims lack factual basis and are designed to promote a political agenda."
Hovering between the interactions between Binance and World Liberty are the two most prominent key figures of the two companies: Zhao, who seeks a pardon, and Trump, the only person in the world who can grant him that pardon. Critics argue that this situation creates a conflict of interest for the president.
Richard Painter, a professor at the University of Minnesota Law School who served as the White House's chief ethics advisor from 2005 to 2007, stated: "We haven't seen anything like this since the Civil War: a president with personal financial interests conflicting with his official duties. We've never witnessed anything close to this significant event."
Previously, the White House stated that Trump had no conflict of interest because he placed his assets in a trust controlled by his eldest son, Donald Trump Jr. The president asserted that he did not engage in business or investment decisions.
An ethics agreement announced before he took office in January stated that Trump would only receive "general updates on business operations" regarding his principal company, Trump Organization, "and would not receive reports on the performance of any specific business or asset."
Trump Jr. celebrated the launch of USD1 in March with a post on X: "Built in America, backed by real dollars, and designed for everyone. Let's revolutionize the financial industry together."
Trump, who previously called Bitcoin a "scam," changed his mind last year, stating he hoped to make the U.S. the "cryptocurrency capital of the world." Now, according to the Bloomberg Billionaires Index, cryptocurrency projects — including World Liberty and the memecoin that Trump announced a few days before his inauguration — have helped increase his wealth by at least $620 million in just a few months. Meanwhile, his administration has withdrawn from lawsuits that financial regulators filed against cryptocurrency companies under former President Joe Biden.
Eric Trump, the president's second son, stated that he became interested in cryptocurrency after banks began refusing to provide services to his family's business. "As soon as you start saying something that goes against the system, they will cancel contracts, boycott, and pursue you, and that is really amazing," he said at a cryptocurrency conference in Dubai in May. "That is really the reason why I turned to cryptocurrency."
Both World Liberty and Binance did not describe how the companies began negotiations. Two close sources said Zhao met Steve Witkoff, one of the co-founders of World Liberty, in December, shortly after Trump's election victory, at a Bitcoin conference in Abu Dhabi.
At that time, Zhao had been out of federal custody in Long Beach, California, for less than three months after serving a short sentence following his guilty plea. His exchange had to pay over $4 billion in fines after the government accused it of allowing money "to flow to terrorists, cybercriminals, and child abusers through its platform."
A close associate of Witkoff denied information about the meeting in Abu Dhabi, stating that Witkoff has no recollection of it. Trump appointed Witkoff, a real estate developer, as a key diplomat in his administration. Witkoff has previously stated that he would divest from World Liberty by transferring interests to his adult sons. "He is working with ethics officials and legal advisors," White House advisor David Warrington said, "including taking all necessary legal steps to divest."
The content of any initial conversations remains unclear. However, in mid-March, Bloomberg News reported that Binance and World Liberty had begun discussions about potentially developing a new stablecoin, and The Wall Street Journal reported that Zhao was pressuring the Trump administration for a pardon.
On social media, Zhao and World Liberty condemned both stories. However, just within two weeks, World Liberty announced that it was creating a new stablecoin to be traded on the Binance-founded blockchain. And in May, Zhao declared that he had applied for a pardon.
He shared on Farokh Radio's podcast that "If they are writing this article, then I might as well officially apply."
As a stablecoin, USD1 is expected to always hold a value of $1 as each token is said to be backed by $1 of real assets like cash or treasury bonds. Developers believe stablecoins will revolutionize international payments as they can be transferred quickly and cost-effectively. However, critics argue that they are prone to bank runs and note that the federal government has previously linked some stablecoins to illegal activities. According to a recent audit of World Liberty's reserves, no such activities were linked to World Liberty, which holds $2.1 billion in government money market funds.
Stablecoins can generate profits for issuers, who earn interest from the collateral backing them. Tether Holdings SA, the issuer of the world's most popular stablecoin, reported a profit of $13 billion last year.
When USD1 launched, World Liberty listed only one business partner: BitGo Inc., based in Palo Alto, California, which said it would provide "the essential infrastructure and user experience" for minting and burning stablecoins. "Minting and burning" means creating new tokens when users purchase them and destroying them when they are redeemed for cash. A BitGo spokesperson declined to comment.
Shortly after World Liberty announced its new stablecoin, Binance's BNB Smart Chain incorporated this new token into a broad promotional campaign, waiving transaction fees for trades. A Binance spokesperson stated that this campaign was designed "to promote stablecoins built on BNB Chain."
"In principle, BNB Chain is open to all projects, and particularly welcomes stablecoins," she said. A representative of BNB Chain noted that USD1 does not receive any incentives.
A recent legal filing from Circle Internet Group Inc., another stablecoin issuer, shows the value of promotional support. Circle stated that it prepaid $60 million to Binance partly to promote its USDC coin and agreed to share future revenue with the exchange. Under a two-year agreement, Binance also agreed to hold USDC in the company's treasury.
According to blockchain data, World Liberty's new stablecoin has had a rather sluggish start, which is not surprising. There is a lot of competition, some of which have a solid foothold, and all offer similar, if not identical, functions.
But by May, Zhao had participated in the largest use of USD1 to date. That same month, an investment company established by the UAE used this stablecoin to buy $2 billion worth of shares in Binance.
This left Circle executives surprised, as they expected their stablecoin to be chosen, according to two close sources. Using World Liberty's coin means Binance loses out on revenue share, part of the promotional agreement with Circle, according to these individuals, who requested anonymity as the matter remains private.
Later, Zhao posted on X that the decision on which currency to use in transactions "is primarily up to the payer's choice." MGX did not respond to requests for comment.
Binance's wallet still holds over $2 billion. With that amount, even a 4% yield could generate $80 million annually. According to the terms in World Liberty's prospectus, the Trump family would receive about $30 million.
Meanwhile, Zhao's relationship with U.S. regulators has significantly improved. In May, the U.S. Securities and Exchange Commission (SEC) dropped the lawsuit against Binance filed in June 2023, one of many enforcement actions focused on cryptocurrency that the regulator has abandoned or paused.
The SEC has accused the exchange, among many other actions, of lying to regulators about its operations in the U.S. The lawsuit cited a former compliance director of Binance texting a colleague: "We are operating as an unlicensed securities exchange in the U.S., dude." The SEC stated it dropped the lawsuit "at its discretion and for policy reasons."