EXCLUSIVE: The Block and Binance were working on a deal. Then a fight broke out.

The Block and Binance were working on a potentially lucrative strategic partnership for more than a month, a source with knowledge of the negotiations told Modern Consensus. Then, on Nov. 21, the crypto news and research site published a story claiming that a police raid forced Binance out of its Shanghai offices.

Not only was that wrong—at least about the police raid part—it enraged  cryptocurrency exchange Binance’s billionaire CEO, Changpeng “CZ” Zhao. He promptly jumped on Twitter, telling his 450,000 followers that The Block’s story was a lie. There was no raid, he said, and Binance hasn’t had a Shanghai office for two years.

During the four-day Twitter fight that followed, Zhao attacked The Block’s reputation aggressively. In the process, Zhao came off as a bully trying to intimidate media outlets that do not act as cheerleaders for the industry. 

Bad story, worse words

From his initial tweet, Zhao accused The Block of peddling FUD. That’s industry shorthand for Fear, Uncertainty, and Doubt. FUD’s a catchall phrase used in the cryptocurrency community for anything causing a price downturn. However, when directed at a person or company—particularly an industry insider—it’s more than an epithet, it’s an accusation of malice. So is another term he and many others on Twitter used, “fake news.”

Still, the scuttled deal is the bigger loss for The Block. It has a business model that relies on upselling readers to a paid tier. Modern Consensus’s source couldn’t or wouldn’t say what kind of partnership was being discussed. But, a possible comparison is The Block’s current deal to put its content on the Coinbase app. Coinbase might be a well-known exchange, but it’s just the 44th largest by volume according to CoinMarketCap. Binance, on the other hand, is No. 4. That’s a lot of eyeballs lost for a start-up media outlet.

On top of that, the price of bitcoin (BTC) plummeted more than $1,000 over the next day, dropping briefly below $7,000. Zhao blamed it on The Block’s story. Many others did the same, and a great deal of abuse from crypto-Twitter followed.

The significance of a police raid could account for the market reaction. China has been engaged in a high-profile crackdown on cryptocurrency trading and exchanges—which are banned but have been allowed to operate as long as they keep a low profile—for several weeks. If the authorities sent police after a powerhouse like Binance, which has excellent connections with officials, it would signal that a much more severe crackdown was coming. That could hamstring the biggest, richest and most active cryptocurrency market in the world. 

Everyone is wrong

Besides looking like a bully, Zhao appeared dishonest as he was defending his company. His initial tweet denying both the raid and the existence of Shanghai offices looked like a half-lie by the time the four-day Twitter storm subsided after the weekend. 

For his part, Frank Chaparro, The Block’s director of news, admitted on Nov. 22 that there was no police raid. Instead, he said, an in-depth investigation showed the office was abandoned after local officials visited.

He also came out with a long editorial explaining what the outlet got wrong—and what it didn’t. The police raid report came from a Binance employee who had proven to be a reliable source in the past. The source claimed to have witnessed it. 

By that time, tempers were high and Chaparro aggressively defended the rest of the story. Binance had actually abandoned two offices, he claimed. Aside from his own sources, Chaparro cited a local publication that interviewed the building manager of one of the now-abandoned offices.

Zhao demanded an apology, but Chaparro’s combative editorial made pretty clear that wasn’t happening. He came just short of calling Zhao a liar for denying the existence of Binance offices.

Controllable freedom

Zhao’s use of FUD started out as rhetoric, but he soon lost control of it. After he tweeted out advice that blockchain entrepreneurs should set aside some cash to fight FUD, another cryptocurrency billionaire upped the ante.

Tron CEO Justin Sun—who has had his own press problems—chimed in with a pledge of 100 bitcoin (BTC) for a FUD fighting fund. Although clearly pushed beyond what he intended, Zhao matched it. 

Now there was a slush fund worth (at that time) more than $1.5 million. “[L]et’s make sure the fudders pay too,” Zhao said.

Mike Dudas, The Block’s CEO, promptly called them out as billionaires trying to intimidate journalists by threatening expensive lawsuits.

Dudas’ claim struck a note with others in the industry. Ryan Selkis, CEO of cryptocurrency data provider Messari, warned that Zhao and Sun were the ones threatening the industry. Good, professional data and research “is pre-condition for crypto not looking like a joke to new investors,” he tweeted. He called for a free press fund to counter the billionaire’s FUD fighting fund.

On Nov. 24, Zhao tweeted out a different perspective on the role of the media. That is to be a standard bearer for the industry, not to shine a light on it.

“Freedom of speech means you can express your opinions all you want,” Zhao said. “It does not mean you can spread fake news or lies, especially when lies you spread cause panic, prices to drop, and hurts others. Freedom does not mean you can hurt others.”

But it’s hard for journalists to exercise their freedoms when billionaires are threatening them with expensive lawsuits.