Binance founder Changpeng Zhao sentenced to four months in prison

Binance founder Changpeng Zhao was sentenced to four months in prison for failing to implement adequate protections against money laundering. Zhao, once the head of the world’s largest crypto exchange, pleaded guilty in November 2023.

Judge Richard Jones said Zhao prioritized “Binance’s growth and profits over compliance with U.S. laws and regulations.” Although Jones doesn’t think Zhao is likely to reoffend, the scale of the crime is remarkable.

Although Zhao is not as well known as FTX fraudster Sam Bankman-Fried, he is a more prominent figure in the crypto world. The Chinese-Canadian entrepreneur founded Binance in 2017. Although he had to resign as CEO of the exchange as part of his plea deal, he is still the majority shareholder of the company, which one person said. Bloomberg was “a huge shitcoin casino.” Binance has listed significantly more tokens than its competitors such as Coinbase.

Prosecutors requested three years in prison, double the recommended sentence of 18 months, because “the scope and consequences of Zhao’s misconduct were massive,” they wrote in their sentencing memo. They also suggested that Zhao’s sentence should “reflect the significant harm caused to American national security by his criminal acts.”

Binance authorized sanctions violations worth more than $898 million, according to prosecutors, and “violated U.S. law on an unprecedented scale.” Zhao and other Binance executives failed to comply with U.S. laws, including the Bank Secrecy Act (BSA), and failed to adequately implement anti-money laundering efforts. As a result, Iranian customers were able to conduct transactions of at least $1.1 million with U.S. customers, in violation of sanctions. Other sanctioned countries, such as Cuba and Syria, were also able to conduct transactions.

Zhao’s lawyers, in their own sentencing memo, said Zhao deserves no prison time because “no defendant in a similar BSA case has ever been sentenced to incarceration.” Zhao traveled from his home in the United Arab Emirates to plead guilty. He remained in the United States “far 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 with a reputation for flouting US laws. In October 2022, Sam Bankman-Fried, CEO of rival exchange FTX, tweeted (and deleted) that he was “excited to see (Zhao) represent the industry in Washington in the future!” uh, he’s still allowed to go to Washington DC, right? A week later, Zhao tweeted that he would sell his FTX token holdings in response to a success story in CoinDesk. Given that Binance was an early investor in FTX, this was quite a significant amount. “We will not support those who lobby against other industry players behind their backs,” Zhao said. said.

Zhao has already agreed to pay a $50 million fine, a pittance compared to the estimated $33 billion fortune he made with Binance. He also agreed not to appeal any sentence of up to 18 months.