Changpeng Zhao, the founder of Binance cryptocurrency exchange, has been sentenced to four months of imprisonment.
Binance accepted a penalty of $4.32 billion, with Zhao paying a $50 million criminal fine and an additional $50 million to the US Commodity Futures Trading Commission.
Changpeng Zhao, previously the CEO of Binance, received a four-month prison sentence on Tuesday for pleading guilty to violating US anti-money laundering laws at the largest cryptocurrency exchange globally.
Once revered as a prominent figure in the crypto sector, Zhao, also known as “CZ,” becomes the second major cryptocurrency executive to face imprisonment.
The duration of the sentence, as decided by US District Judge Richard Jones in Seattle, falls short of the three years requested by prosecutors and is below the maximum recommended 1-1/2 years under federal guidelines.
In comparison, the sentence was notably lighter than the 25-year imprisonment handed to Sam Bankman-Fried in March for embezzling $8 billion from clients of his now-defunct FTX exchange. Bankman-Fried is currently appealing his conviction and sentence.
Nevertheless, prosecutors welcomed the conclusion of the extensive investigation into Binance and Zhao, a billionaire who had been residing beyond the jurisdiction of the United States in the United Arab Emirates.
US Attorney Tessa Gorman expressed satisfaction with the outcome, stating, “This was a significant day. Incarceration played a crucial role in this case, and we are pleased with the result,” to reporters outside the courthouse.
Prior to issuing the sentence, Jones criticized Zhao for prioritizing Binance’s expansion and financial success over adhering to US regulations.
“You had the resources, financial capacity, and manpower to ensure full compliance with every regulation,” he stated.
Upon hearing his sentence, 47-year-old Zhao displayed no visible reaction.
In the courtroom, he was attired in a navy blue suit and tie, accompanied by his mother and several other relatives. Defense attorneys had petitioned for probation.
Dennis Kelleher, the leader of the financial reform advocacy organization Better Markets, expressed his views via email, stating, “Today’s message is that ‘crime pays,’” highlighting that Zhao will retain his considerable wealth.
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Prosecutors emphasized to the judge that a harsh sentence would serve as a clear deterrent to potential wrongdoers.
“We’re not implying that Mr. Zhao is on the same level as Sam Bankman-Fried or that he’s a monster,” stated prosecutor Kevin Mosley.
Mosley clarified that Zhao’s actions were not merely an oversight or regulatory slip-up.
Zhao resigned as Binance’s CEO in November, coinciding with his admission of violating anti-money laundering regulations outlined in the Bank Secrecy Act.
Defense attorneys argued for probation, citing similar cases where individuals like BitMEX founder Arthur Hayes weren’t incarcerated after admitting to similar infractions.
While Zhao aimed to make a positive impact, acknowledged defense lawyer Mark Bartlett, he nonetheless made errors in judgment.
Judge Jones deemed the three-year sentence proposed by prosecutors inappropriate, as they failed to demonstrate that Zhao had prior knowledge of unlawful activities.
“It’s typical for the government to request more than what they anticipate receiving,” noted Frenchman. “Requesting a sentence significantly above the guidelines for a defendant who pleaded guilty is an unusually aggressive move.”
Following the cryptocurrency market’s downturn in 2022, which exposed widespread fraud and misconduct, numerous other crypto figures are under scrutiny by US authorities.
