In a surprise development, U.S. prosecutors are seeking a 36-month prison sentence for Changpeng Zhao, the founder of cryptocurrency exchange Binance, according to a court filing Tuesday. Zhao, who resigned as CEO but remains majority owner of the company, is scheduled to be sentenced April 30 in Seattle after pleading guilty in November to violating U.S. anti-money laundering regulations.
As part of his plea agreement, Zhao agreed to pay a $50 million fine, while Binance offered to pay $4.3 billion in fines and restitution. However, prosecutors are now seeking a harsher sentence than the 18 months originally recommended in federal sentencing guidelines, arguing that the seriousness of Zhao’s willful violation of U.S. law and its implications warrant a sentence above the guidelines.
Zhao reaped enormous rewards for his violation of U.S. law, […] and the price of this violation must be significant to effectively punish Zhao for his criminal actions and deter others tempted to build fortunes and business empires through violations of U.S. law.
Alleged negligence and operational deficiencies
Prosecutors allege Zhao failed to implement a robust anti-money laundering (AML) program at Binance, which allowed illicit actors to exploit the exchange for activities such as operating mixing services to conceal the cryptocurrency’s origins. Additionally, Binance is said to have facilitated transactions between Iranian and US customers, undermining US sanctions against Iran and potentially jeopardizing the exchange’s liquidity.
In February, a settlement addressed significant operational deficiencies at Binance, including the platform’s failure to report over 100,000 suspicious transactions related to designated terrorist organizations such as Hamas, Al-Qaeda and ISIS. The exchange has also been accused of facilitating transactions related to child sexual abuse materials and proceeds from ransomware activities.
Despite the legal challenges, Zhao’s personal wealth grew by nearly $10 billion last year, according to the Bloomberg Billionaires Index. His current wealth exceeds $42 billion, making him the 29th richest person in the world.
The outcome of Zhao’s sentencing hearing on April 30 will undoubtedly have a significant impact on both the cryptocurrency industry and the broader financial landscape, as regulators and law enforcement continue to grapple with the challenges posed by the rapidly evolving digital asset space.
Zhao is not the only Binance official currently in trouble. After Binance suspended its services in Nigeria in early March, two company representatives were arrested in the country, following which the company issued a statement requesting their release.