A federal judge has sentenced Binance founder Changpeng Zhao (often known as “CZ”) to four months in prison, as first reported by The New York Times. The public prosecutor recommended three years. Zhao pleaded guilty in November to violating the Bank Secrecy Act by failing to establish an anti-money laundering program.
The DOJ accused Zhao of allowing criminal activity to thrive on the crypto exchange. “Binance has turned a blind eye to its legal obligations in the pursuit of profits. “His intentional errors allowed money to flow through his platform to terrorists, cybercriminals and child molesters,” Treasury Secretary Janet Yellen said in November.
The government accused Binance of failing to comply with American sanctions and failing to report suspicious transactions related to drugs and child sexual abuse materials. Prosecutors said in court that Zhao told Binance employees that it was “better to ask for forgiveness than permission,” while also boasting that Binance wouldn’t be “as big as we are today” if it were would have adhered to the law.
Under the terms of the plea deal, Binance agreed to forfeit $2.5 billion and pay a $1.8 billion fine. Zhao personally paid $50 million as part of the settlement.
Although the charges differed, Zhao’s sentence is significantly shorter than the 25 years his colleague Sam Bankman-Fried was sentenced to in March. SBF, as he is often called, was convicted of seven counts of fraud and conspiracy for his role at the helm of crypto platform FTX.
Zhao played an integral role in Bankman-Fried’s downfall – and the overall decline of the crypto industry over the past 18 months. The Binance founder tweeted in November 2022 that his company would liquidate its shares in FTX’s de facto token. He said: “The recent revelations that have been made[sic] bring to light” citing “ethical concerns” and “regulatory risks”. The posts not only destroyed FTX, but the crypto world as a whole. (They also likely helped attract the government’s attention.) When FTX’s sources dried up after the platform’s rapid collapse, Zhao briefly agreed to buy the company but quickly backed out.
Prosecutors said Zhao’s crimes were punishable by a standard federal sentence of 12 to 18 months, but argued for a three-year sentence, calling his crimes “of unprecedented magnitude.” But Judge Richard A. Jones saw it differently and sentenced him to a paltry twelfth of the government’s proposed term.
“This wasn’t a mistake — it wasn’t a regulatory issue,” Kevin Mosley, a Justice Department attorney, reportedly said in court Tuesday. “The violation of U.S. law was not a side effect of his plan to make as much money as possible. Violating the law was an integral part of this endeavor.”