Changpeng Zhao, founder of Binance, the world’s largest cryptocurrency exchange, has been sentenced to four months in prison.
Judge Richard Jones, who presided over the sentencing hearing Tuesday in the Western District of Washington, handed down a lighter sentence than the three years requested by prosecutors.
Last November, Zhao, better known as CZ, pleaded guilty to willfully violating anti-money laundering rules that allowed hundreds of millions of dollars in transactions involving U.S.-sanctioned entities, including Iran and Cuba, to pass through through the Binance platform. The plea deal called for Zhao to resign as CEO of Binance and accept a $150 million fine, and for the company to pay a $4.3 billion fine.
“Zhao’s deliberate violation of U.S. law was neither an accident nor an oversight,” the U.S. Department of Justice wrote in a court filing before the sentencing. “He made the business decision that violating US law was the best way to attract users, build his company and line his pockets.”
In the filing, prosecutors requested that Zhao receive a 36-month prison sentence, noting the need to “deter others who are tempted to build fortunes and business empires in violation of U.S. law.” Zhao’s lawyer requested bail, on the grounds that no defendant in a comparable case “has ever been sentenced to prison.”
To hand down an appropriate sentence for Zhao, the judge had to “look beyond the guidelines” and take into account context beyond the facts of the underlying crime, says Daniel Richman, a law professor at Columbia University and former prosecutor. federal. That includes the character of the defendant, likelihood of recidivism, past violations and other factors.
in a letter To the judge before the hearing, Zhao apologized for his conduct and accepted responsibility for failing to establish an effective compliance program at Binance. “Words cannot explain how deeply I regret the decisions that led me to appear before the Court,” she wrote. “Please accept my assurance that this will be my only encounter with the criminal justice system.”
Zhao’s willingness to “plead guilty and take responsibility” will have counted in his favor, Richman says, but evidence of his blatant disregard for the law will have weighed heavily on the judge. “When you have someone who so consistently disobeyed the law, you would expect respect for the law to loom large in whatever sentence the judge imposes,” Richman says.
Zhao is the second crypto figure to face a criminal sentence in the US in as many months. On March 28, Sam Bankman-Fried, or SBF, founder of the bankrupt FTX crypto exchange, was sentenced to 25 years in prison. Before their respective falls from grace, the pair vied for control of the foreign exchange market and reportedly fought frequently. But the similarities between the cases end there.
“It’s an easy comparison, but it’s an imperfect one,” says Daniel Silva, an attorney at the Buchalter law firm and a former U.S. attorney. “CZ pleaded guilty to failing to follow the law as required of an executive of a financial institution. “SBF was different: it was misusing client funds, obtained through fraudulent misrepresentations and material omissions of fact.”
On his own presentation of sentence, Zhao’s lawyer made a thinly veiled reference to the distinction. “Mr. Zhao has been convicted solely of AML [anti-money-laundering] non-compliance,” they wrote. “There has been no defrauding of any investors nor has there been any misappropriation of client funds.” His client, they seemed to say, is not SBF.
Zhao will not be required to forfeit the wealth he has accumulated as the founder of Binance as part of his sentence. Although he left Binance in November, Zhao is It is reported to retain an estimated 86 percent stake. on the exchange and is still worth tens of billions of dollars.
The DOJ, which until last year had assured few historic crypto convictions, will nevertheless celebrate the sentence. “If people criticize the sentence as too light, it sends a healthy message,” Silva says. The goal is to “deter the next CEO of cryptocurrencies or financial institutions from flouting anti-money laundering regulations.”
