Changpeng Zhao, the founder and former CEO of Binance, the world’s largest cryptocurrency exchange, was sentenced to four months in federal prison on Tuesday for violations of anti-money laundering laws during his tenure.
The sentencing comes after Zhao pled guilty in November to failing to maintain an effective anti-money laundering program, while Binance admitted to engaging in violations of the Bank Secrecy Act and other infractions.
TLDR
Binance founder Changpeng Zhao (CZ) was sentenced to 4 months in prison for violating anti-money laundering laws during his time as CEO.
U.S. prosecutors sought a 3-year prison term, but the judge cited CZ’s cooperation, first-time offender status, and letters of support as mitigating factors.
Binance admitted to violating the Bank Secrecy Act, failing to register as a money-transmitting business, and enabling transactions that undermined U.S. sanctions against Iran.
CZ agreed to pay a $50 million fine, while Binance will pay a $4.3 billion fine and retain an independent compliance monitor for three years.
Some critics argue that the sentence was too lenient given the scope and ramifications of CZ’s conduct, which enabled the laundering of hundreds of millions of dollars.
U.S. prosecutors had sought a three-year prison term for Zhao, arguing that the scope and ramifications of his conduct were massive, enabling the laundering of hundreds of millions of dollars earned through illegal activities such as drug sales, stolen financial information, and ransomware payments.
Additionally, Binance and Zhao knowingly undermined U.S. sanctions against Iran by allowing U.S. persons to conduct transactions with Iranian nationals and businesses.
However, U.S. Judge Richard Jones was skeptical of the government’s request for a lengthy sentence, citing Zhao’s cooperation with the investigation, his status as a first-time offender, and the more than 160 letters of support written by his family, friends, and business associates as evidence of his good character.
Jones believed that Zhao had accepted responsibility for his actions, although he agreed with the government that some jail time was necessary to deter other potential lawbreakers.
Zhao’s lawyers had requested that he be sentenced to probation with no jail time, arguing that he had shown remorse and had taken steps to remediate the situation.
They also noted that no defendant in a similar Bank Secrecy Act case had ever been sentenced to incarceration.
As part of the settlement, Zhao agreed to personally pay a $50 million fine, a fraction of his estimated $40 billion net worth, while Binance will pay a $4.3 billion fine and retain an independent compliance monitor for three years to oversee its anti-money laundering systems.
Binance stated that it has created a “culture of compliance, security, and transparency” in recent years, updating its know-your-customer protocols and expanding its anti-money laundering capabilities.
Critics, such as Dennis Kelleher, president and CEO of the financial-reform group Better Markets, called the decision “an egregious miscarriage of justice” and argued that the sentence was too lenient given the severity of the crimes committed.
Kelleher believes that Zhao, his leadership team, and numerous employees should have faced longer prison sentences, and that Binance itself should have been put out of business.
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