Changpeng Zhao, the former CEO of Binance, was sentenced to four months in prison on Tuesday after pleading guilty to violating US anti-money laundering laws at the world's largest cryptocurrency exchange.
Once considered the most powerful figure in the crypto industry, Zhao, known as “CZ,” is the second major crypto boss to be sentenced to prison.
The sentence imposed by U.S. District Judge Richard Jones in Seattle was significantly shorter than the three years requested by prosecutors and below the one-and-a-half year maximum recommended by federal guidelines.
It was also much lighter than the 25 years behind bars Sam Bankman-Fried received in March for stealing $8 billion (roughly Rs. 66,788 crore) from clients of his now-bankrupt FTX exchange. Bankman-Fried appeals his conviction and sentence.
Still, prosecutors applauded the outcome of what had been a years-long investigation into Binance and Zhao, a billionaire living out of U.S. reach in the United Arab Emirates.
“This was an epic day,” US Attorney Tessa Gorman told reporters outside court. “Incarceration was critical in this case and we are pleased with the outcome.”
Before handing down the sentence, Jones faulted Zhao for making Binance's growth and profitability a higher priority than complying with US laws.
“You had the means, the financial capabilities and the people power to make sure that all the regulations had to be met and so you failed in that opportunity,” he said.
Zhao, 47, was visibly unresponsive upon hearing his sentence.
He was wearing a navy blue suit and tie in the room, with his mother and several family members. Defense lawyers had asked for probation.
“'Crime pays' is the message sent today,” Dennis Kelleher, head of the financial reform advocacy group Better Markets, wrote in an email, noting that Zhao will still keep his vast wealth.
'Sorry'
Prosecutors said Binance used a “wild west” model that welcomed criminals and failed to report more than 100,000 suspicious transactions with designated terrorist groups such as Hamas, al-Qaeda and the Islamic State.
They also said that Zhao's exchange supported the sale of child sexual abuse materials and received a large share of the proceeds of the ransomware.
Binance agreed to a penalty of $4.32 billion (roughly 36.065 billion rupiah) and Zhao paid a criminal fine of $50 million (roughly 417 million rupiah) plus $50 million to the Commodity Futures Trading Commission US Basics.
“I'm sorry,” Zhao told the judge before he was sentenced.
“I think the first step in taking responsibility is to fully own up to mistakes. I failed to implement an adequate anti-money laundering program here…I now realize the gravity of this mistake.”
Much of Binance's misconduct, including lax money laundering controls, was first reported by Reuters.
Zhao will voluntarily turn himself in to serve his sentence, most likely at a detention center near Seattle-Tacoma International Airport.
“Not prioritizing compliance is a few shades below criminal intent. It's bad, but it's below the usual requirement of specific intent” that would warrant a sentence of a few years, said Robert Frenchman, a criminal defense attorney. white collar
But given the scale of Binance's violations and the massive fines imposed, he shouldn't have expected probation or house arrest, Frenchman added.
Not a monster
Prosecutors had told the judge that a harsh sentence would send a clear signal to other would-be criminals.
“We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster,” said prosecutor Kevin Mosley.
But Zhao's conduct, he said, “was not a mistake. This was not a regulatory 'oops.'
Zhao stepped down as head of Binance in November, when he and the exchange he founded in 2017 admitted to evading money laundering requirements under the Bank Secrecy Act.
In seeking parole, defense lawyers said others who admitted to a similar crime, including BitMEX founder Arthur Hayes, were not jailed.
Zhao “wanted to make a difference in the world,” but he made mistakes, defense attorney Mark Bartlett said.
Jones said the three-year sentence sought by prosecutors was inadequate because they did not show Zhao had prior knowledge of illegal activity.
“It is always the case that the government asks for more than they think they will get,” the Frenchman said. “To go so far above the guidelines for an attorney is unusually aggressive.”
Several other crypto tycoons are also in the crosshairs of US authorities after the 2022 crypto price collapse exposed fraud and misconduct across the industry.
© Thomson Reuters 2024
