Binance founder Changpeng Zhao was sentenced to four months in prison for failing to put adequate protections against money laundering in place. Zhao, once the head of the world’s largest crypto exchange, pleaded guilty in November 2023.
Judge Richard Jones says Zhao “prioritized Binance’s growth and profits over compliance with U.S. laws and regulations.” While Jones doesn’t believe Zhao is unlikely to reoffend, the scale of the crime is remarkable.
Binance “violates US law on an unprecedented scale”
Although Zhao is not as well-known as FTX scammer Sam Bankman-Fried, he is a more important figure in the crypto world. The Chinese-Canadian entrepreneur founded Binance in 2017. Although he was forced to step down as CEO of the exchange as part of his consent agreement, he is still the company’s majority shareholder, one person said Bloomberg was “a huge shitcoin casino.” Binance listed many more tokens than competitors like Coinbase.
Prosecutors asked for a prison sentence of three years, twice the guideline sentence of 18 months, because “the scope and consequences of Zhao’s misconduct were enormous,” they wrote in their sentencing memorandum. They also suggested that Zhao’s sentence should “reflect the significant harm caused to U.S. national security by his criminal actions.”
According to prosecutors, Binance allowed more than $898 million in sanctions violations and “violated U.S. law on an unprecedented scale.” Zhao and other Binance executives did not comply with U.S. laws, including the Bank Secrecy Act (BSA), and did not adequately implement anti-money laundering measures. As a result, Iranian customers were able to transact at least $1.1 million with U.S. customers in violation of the sanctions. Other sanctioned countries such as Cuba and Syria were also able to carry out transactions.
Zhao’s lawyers said in their own sentencing memorandum that Zhao did not deserve prison time because “no defendant in a remotely similar BSA case has ever been sentenced to prison.” Zhao traveled from his home in the United Arab Emirates to enter his guilty plea. He remained in the United States “away from his home, his partner and his young children for five and a half months,” his lawyers wrote. Additionally, Binance has taken steps to improve its anti-money laundering procedures, they wrote.
In the crypto world, Zhao has long been known as a cowboy known for flouting US laws. In October 2022, Sam Bankman-Fried, CEO of rival exchange FTX, tweeted that he was “excited.” [Zhao] We represent the industry in DC in the future! Uh, he’s still allowed to go to DC, right?” A week later, Zhao tweeted that he was selling his FTX token holdings in response to a Blockbuster story CoinDesk. Since Binance was an early investor in FTX, this was a pretty significant amount. “We will not support people who lobby against other industry players behind their backs,” Zhao said said.
Zhao has already agreed to pay a $50 million fine, small compared to the estimated $33 billion fortune he made on Binance. He also agreed not to appeal a sentence of up to 18 months.