Why did Binance choose Forbes?

Source: Blockchain Daily

Authors: Dong Yujia, Xu Cihao

On February 10, local time in the United States, Forbes announced that it has received a strategic investment of $200 million from Binance.

According to official information, after the completion of this transaction, Binance's Chief Communications Officer Patrick Hillmann and the head of the exchange's venture capital department Bill Chin will join the Forbes board of directors.

At the same time, if the transaction is completed, Binance will become one of the largest shareholders of Forbes.

A reporter from Blockchain Daily asked Binance about the considerations behind the investment in Forbes and its future media strategy. As of the time of publication, there has been no response from them.

Binance's Second Largest Investment in History

In August 2021, Forbes announced that it had reached an agreement with a special purpose acquisition company named Magnum Opus Acquisition Limited to go public on the New York Stock Exchange through a merger, with the stock code "FRBS".

The agreement reached at that time valued the merged company at $630 million and planned to raise $600 million in new investments.

The official transaction overview indicated that the planned $600 million includes approximately $200 million in cash held in the Magnum Opus trust account, as well as $400 million raised through a private investment in public equity (PIPE).

This means that Forbes needs to seek the remaining $400 million in investment through private placements. Binance's $200 million investment in Forbes accounts for half of the $400 million.

"Forbes has become a resource for those interested in the emerging digital asset world," said Forbes CEO Mike Federle. "With the help of Binance, Forbes can become a leader in this field."

However, regarding the actions of other industry companies acquiring or investing in media, there are often doubts about the future independence of the media.

Binance founder and CEO Zhao Changpeng tweeted early this morning, stating, "The editorial independence of Forbes is and will always be inviolable. The strength of the Forbes brand and our investment rely on this ongoing independence."

He also added that Binance has become accustomed to media "scrutiny," stating, "When you are a leader in a disruptive industry, this is a necessary reality."

Since 2021, companies in the cryptocurrency sector have been continuously sponsoring sports events and venues, investing huge sums of money. Binance's investment in Forbes is also a significant attempt for the cryptocurrency sector to enter the media industry.

Blockchain and digital economy scholar Wu Tong told a reporter from Blockchain Daily that Binance's main considerations are, first, to enhance its brand image after achieving significant wealth accumulation, realizing a transformation from "rich to noble."

"Secondly, it symbolizes the replacement of the previous era's leaders by the leaders of emerging industries, which carries strong symbolic significance."

In addition, Zhao Changpeng emphasized the importance of supporting media in the cryptocurrency industry. In a media interview, he stated, "With the advancement of Web3 and blockchain technology and the maturation of the cryptocurrency market, we know that media is an important factor in building broad consumer understanding and education. We look forward to supporting Forbes' digital initiatives as they will develop into a new investment insight platform."

So far, Binance has clearly made significant progress in promoting knowledge about cryptocurrencies and Bitcoin.

Binance's largest investment to date was the acquisition of CoinMarketCap. Binance announced the acquisition of the cryptocurrency market data website CoinMarketCap in April 2020, but the acquisition amount was not disclosed. However, according to insiders, the acquisition cost was $400 million.

Forbes and Binance

Forbes was founded in 1917 by Scottish-American financial journalist Bertie Charles Forbes.

In 2014, to accelerate global business development, the Forbes family agreed to sell the business, with Hong Kong-based Binhui Whale Media Investment Co., Ltd. acquiring a majority stake.

According to official data, Forbes currently covers 77 countries/regions, with 46 authorized local versions, and has 150 million readers worldwide.

Forbes' rich list has always been well-known. In recent years, the number of entrepreneurs from the cryptocurrency sector on its global billionaire list has been increasing.

In Forbes' 2021 global billionaire rankings, Zhao Changpeng ranked 1664th with a net worth of $1.9 billion.

Notably, just this week, a former columnist for Forbes, Heather Morgan, and her husband were arrested for allegedly attempting to launder $3.6 billion in Bitcoin stolen from the Bitfinex exchange six years ago.

Morgan's contributor status was revoked by Forbes in September 2021.

Additionally, Binance had previously sued Forbes for defamation starting in November 2020. At that time, Forbes reported that "Binance, the world's largest cryptocurrency exchange, conceived a carefully designed corporate structure aimed at deliberately deceiving regulators and secretly profiting from U.S. cryptocurrency investors."

In the initial documents submitted to the court, Binance stated, "This story contains many false, misleading, and defamatory statements." However, the lawsuit was withdrawn by Binance in February 2021.

Cai Kailong, an expert from the Whale Platform Think Tank and a senior researcher at the Financial Technology Research Institute of Renmin University of China, told Blockchain Daily that investing in Forbes demonstrates Binance's efforts to create better public relations conditions for itself.

Cai Kailong analyzed that Zhao Changpeng was recently rated as the world's richest Chinese by the media, and Binance has many areas that need compliance, so acquiring a reputable traditional media outlet like Forbes has a positive effect on Binance.

The Background is Binance's Continuous Regulatory Pressure from Around the World Since 2021

On October 19, 2021, Binance officially announced the completion of its 17th BNB burn, totaling 1,335,888 BNB, worth approximately $638 million. According to Binance's rule of burning 20% of quarterly profits in BNB, a reporter from Blockchain Daily estimated that Binance's profit for the third quarter of 2021 was approximately $3.15 billion (about 20.16 billion RMB), an increase of 62% from the second quarter's $1.965 billion (about 12.576 billion RMB).

However, Binance stated in December 2021 that it would adopt a new BNB "burn" mechanism in the future, which would no longer be linked to the exchange's profits.

Based on publicly available information, a reporter from Blockchain Daily compiled the following warnings from regulatory agencies in various countries and regions regarding Binance in 2021:

In March 2021, Japan's Financial Services Agency stated that Binance violated the country's Fund Settlement Act, had inadequate user protection mechanisms, and provided services to Japanese citizens without a license, ordering it to delist.

On April 21, 2021, Germany's Federal Financial Supervisory Authority (BaFin) issued a statement saying that Binance's "Binance Stock Tokens" violated the country's regulations.

On June 21, 2021, Japan's Financial Services Agency issued a second warning, stating that Binance was operating without a license.

On June 25, 2021, the UK's Financial Conduct Authority (FCA) warned Binance, stating that it "does not hold a license";

Two days later, on June 27, Ontario, Canada ordered Binance to cease operations in the province and simultaneously issued warnings to cryptocurrency exchanges Bybit, KuCoin, and Poloniex.

On July 1, 2021, Singapore's central bank MAS stated that it would conduct "close monitoring" of Binance's subsidiary Binance Singapore.

On the same day, the Cayman Islands Monetary Authority (CIMA) stated that it recommended "not allowing Binance to operate in the country."

On July 6, 2021, Poland's Financial Supervisory Authority (PFSA) warned investors that Binance was not licensed to operate in Poland and that national risk awareness should be strengthened.

On July 16, 2021, the Hong Kong Securities and Futures Commission pointed out that the Binance Group was providing unregistered services in the region. Binance was forced to announce that it would immediately cease services, including futures and derivatives trading services;

On July 30, 2021, Malaysia's Securities Commission (SC) ordered Binance to suspend its website and app services in the country.

On August 27, 2021, Binance stopped supporting trading pairs and payment options for the Norwegian krone and removed its Norwegian language website.

In early September 2021, South Africa's Financial Sector Conduct Authority stated that Binance was not licensed to provide services in the country.

Due to repeated warnings in Singapore, after discovering it had made it onto the Singapore central bank's "warning list," Binance announced on September 5, 2021, that it would cease operations in Singapore.

On December 25, 2021, Binance's Turkish version was reported by the local Financial Crimes Investigation Board (MASAK) and fined 8 million lira due to violations discovered during an audit.

Exchanges "Encircling" Blockchain Self-Media

Cai Kailong told a reporter from Blockchain Daily that Binance's acquisition of Forbes will definitely have a positive influence, but it will not mean that the media will become part of the Binance system as many might imagine.

He further explained, "Of course, Binance might have some negative news that Forbes can choose not to report, or may show some bias, but it cannot be too biased. The independence of American media is still quite important; otherwise, its authority would be affected."

In fact, in recent years, Binance, Huobi, and OKEx have invested heavily in various blockchain self-media outlets.

In 2019, Mars Finance announced the completion of a new round of financing. This round was jointly invested by Binance, Ceyuan Capital, and Matrixport, which was just founded by Wu Jihan, with a post-investment valuation of $200 million.

Mars Finance was founded by Wang Feng, the founder of Blueport Interactive. Investing in Mars Finance was Binance's first strategic investment in mainland China. Zhao Changpeng has stated that information plays an increasingly important role in the mining, flow, and trading of cryptocurrency digital assets.

Previously, Mars Finance completed Series A and A+ financing in March and May 2018, with investors including IDG Capital, Ceyuan Capital, OK Capital, and Huobi Global Ecological Fund. It can be said that Mars Finance is a blockchain self-media that brings together Binance, Huobi, and OKEx.

Compared to Mars Finance, which is still operating, some self-media outlets invested by Huobi and OK Capital have ceased operations.

In June 2018, OK Capital led the investment in "Coin Circle Tonghua Shun," but the company Guangzhou Chuxing Technology Co., Ltd. applied for cancellation in September 2021.

The Xiaocong App is a blockchain media incubated internally by Wall Street Insights, which has received investments from Huobi Capital, Tongzhou Capital, Huixiang Fund, OK Capital, and Silicon Valley De Ding Innovation Fund, but was dissolved in April 2020 due to cash flow issues.

Coin World was established in August 2017, with its flagship product being news alerts, and its slogan is "Stay ahead, know the cryptocurrency world." However, it announced the cessation of operations in July 2021. In September 2017, Coin World received several million RMB in seed round investment, with investors including Huobi Capital.

Another major self-media outlet in the cryptocurrency sector, Jinse Finance, was also founded by Huobi's co-founder Du Jun and received investment from Huobi.

The exchanges' wave of investments in blockchain self-media easily evokes memories of Alibaba's "expansion" into the media landscape years ago. Alibaba Group and Jack Ma personally acquired or invested in various media outlets, including traditional media, new media, and entertainment platforms, through direct and indirect means.

When asked whether investing in Forbes is similar to Alibaba's entry into the media industry during its business expansion, blockchain and digital economy scholar Wu Tong stated that the logic of the two is not the same.

"Alibaba almost covers all tracks of web2 and relies on a typical traffic-driven approach. Although Binance is also the global leader in the cryptocurrency trading sector, its user numbers and recognition still cannot compare to Alibaba at its peak, nor will it regard media as an important revenue source, which is significantly different from Alibaba."