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Former Binance CEO Changpeng Zhao was sentenced to four months in prison after pleading guilty to failing to put adequate money laundering controls in place at the world’s largest cryptocurrency exchange.
The 47-year-old, known in the crypto world as CZ, turned himself in to US authorities in November. He agreed to step down as head of Binance, which he founded in 2017, while the exchange paid $4.3 billion for failing to stop transactions that financed the Hamas and Al-Qaeda terrorist groups and organizations, among other things sanctioned in Iran and Russia.
According to media reports, during his appearance in federal court in Seattle on Tuesday, Zhao expressed regret that Binance had not implemented stricter “Know Your Customer” policies at Binance.
U.S. prosecutors had sought a three-year prison sentence for Zhao, citing the need for the court to send a message “to the world.” His lawyers had insisted that probation would be enough for the first-time offender, citing their client’s willingness to cooperate with the Justice Department. He was released on $175 million bail pending sentencing, despite being banned from leaving the United States.
Binance remains the world’s largest crypto exchange, but its market share has fallen to 42 percent from 60 percent at the start of last year, according to data from CCData.
Last year, the Justice Department detailed how Zhao and Binance routinely flouted compliance rules, resulting in nearly $900 million in transactions that circumvented U.S. sanctions against Iran and the transfer of millions of dollars worth of cryptocurrencies between the stock exchange and the notorious Russian darknet marketplace Hydra. The US government also explained how the exchange is linked to other crimes such as drug trafficking and child sexual abuse.
The government’s files were full of incriminating quotes from Zhao, who has been one of the most prominent and vocal leaders of a crypto company in recent years, courting politicians and celebrities alike. Prosecutors said Zhao told his team that it was “better to ask for forgiveness than permission,” and he had once bragged that Binance would not be “as big as we are today” if it fully complied with U.S. law would have held.
Zhao’s sentencing comes amid a crackdown by US authorities against the crypto industry. But his sentence pales in comparison to the 25 years handed down to his former rival Sam Bankman-Fried, the FTX founder who was found guilty of multiple counts of fraud and money laundering after a five-week trial in New York. Several of Bankman-Fried’s former employees have also pleaded guilty and are awaiting sentencing.
The Securities and Exchange Commission is also demanding more than $5 billion in fines from collapsed crypto conglomerate Terraform Labs and its co-founder Do Kwon, who also faces criminal charges. Earlier this month, crypto trader Avraham Eisenberg was found guilty of defrauding the Mango Markets exchange and its investors out of $110 million.
More than 160 of Zhao’s friends and family members wrote letters to the judge before the sentencing, urging him to show leniency. “His biggest mistake was ignorance,” wrote Yi He, chief customer service officer at Binance and mother of three children with Zhao.