Changpeng Zhao, the founder of Binance, was given a four-month prison sentence on Tuesday for enabling widespread money laundering on the biggest cryptocurrency exchange in the world.
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Although the judge commended Zhao for accepting responsibility for his misconduct, he expressed concern about the former CEO’s choice to disobey American banking regulations, which could have impeded the company’s rapid expansion. Although Zhao’s sentence was much shorter than the three years that the prosecution had requested, Zhao’s defense lawyers had insisted that he serve no jail time.
U.S. District Judge Richard A. Jones told Zhao, “No person— regardless of wealth— is immune from prosecution or above the laws of the United States.”
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After Binance agreed to pay $4.3 billion to settle related allegations, Zhao entered a guilty plea to one count of failing to maintain an anti-money-laundering program in November and announced his resignation. According to U.S. officials, Zhao purposefully turned a blind eye to transactions that financed terrorism, illegal drug sales, and child sex abuse.
Zhao admitted to the court on Tuesday, “I failed here.” “I sincerely apologize and regret my mistake.”
The judge was informed by defense attorneys William Burck and Mark Bartlett that no one had ever received a prison sentence for comparable Bank Secrecy Act violations. Prosecutors countered that no one would enforce the law if Zhao was not sentenced to time in jail for the offense.
More than 1.5 million virtual currency trades worth nearly $900 million that went against US sanctions were approved by Binance, including trades involving Iran, al-Qaeda, and the Hamas-affiliated al-Qassam Brigades.
According to Bartlett and Burck, Zhao did not personally know of any transaction that would have been prohibited by sanctions or regulations imposed by the United States. Furthermore, they contended, Binance handled a negligible percentage of suspicious transactions for a business that processed roughly $500 million worth of transactions every day. Furthermore, they mentioned that before stepping down, Zhao started implementing changes to make Binance a model of compliance with banking transparency laws.
Zhao stated that there was “no excuse for my failure to establish the necessary compliance controls at Binance” in a letter to the court.
“I wish I could alter that passage in Binance’s narrative. However, since 2022, and under my supervision, Binance has put in place the strictest anti-money laundering procedures of any non-US exchange,” he continued.
No one had ever broken the Bank Secrecy Act to the extent that Zhao did, according to the prosecution.
“He says he should have done a better job in hindsight,” attorney Kevin Mosley of the Justice Department informed Jones. This wasn’t an error. Mr. Zhao knew exactly what was expected of him when he broke the BSA.
Zhao gave the order to conceal customers’ locations within the United States, prosecutors said, even though he was aware that Binance needed to implement anti-money-laundering procedures.
Following the hearing on Tuesday, Zhao, his legal team, and his family departed without interacting with the media.
Market crashes and scandals have plagued the cryptocurrency sector. most lately. Nigeria has requested that Binance and two of its executives stand trial for alleged tax evasion and money laundering.
Perhaps the most well-known aspect of Zhao’s profile was his primary rivalry with Sam Bankman-Fried, the creator of FTX, the second-biggest cryptocurrency exchange prior to its collapse in 2022. In November of last year, Bankman-Fried was found guilty of fraud and given a 25-year prison sentence for taking at least $10 billion from investors and customers.
Binance invested in FTX when Bankman-Fried launched the exchange in 2019, and Zhao and Bankman-Fried were once amicable rivals in the industry. But their relationship soured, to the point where Zhao declared in early November 2022 that he was selling all of his cryptocurrency holdings in FTX. A week later, FTX filed for bankruptcy.
Despite the UAE and the United States not having an extradition treaty, Zhao’s lawyers emphasized that their client was willing to travel from the United Arab Emirates, where he and his family reside, to the United States to enter a guilty plea.
They further contended that he wouldn’t be secure in jail. He is not qualified to be housed in a minimum security facility because he is not a citizen of the United States. They suggested that Binance might be a target for violence in a medium security prison due to his wealth and high-profile status, as well as his cooperation with U.S. law enforcement in certain investigations.
Taking that into consideration, the judge sentenced Zhao to four months instead of the five months that U.S. Probation and Pretrial Services had suggested.
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