Changpeng Zhao Sentenced to Four Months in Prison for Violating Money Laundering Laws
Changpeng Zhao, the former CEO of Binance, the world's largest cryptocurrency exchange, was sentenced to four months in prison on Tuesday after pleading guilty to violating U.S. money-laundering laws.
U.S. District Judge Richard Jones in Seattle imposed the sentence, rejecting prosecutors' request for a three-year term. Zhao, known as "CZ," is the second major crypto boss to be sentenced to prison. In March, Sam Bankman-Fried received 25 years behind bars for stealing $8 billion from customers of his now-bankrupt FTX exchange.
Before handing down the sentence, Jones criticized Zhao for prioritizing growth and profits over compliance with U.S. laws. "You had the resources and the power to ensure compliance with every regulation, and you failed," he said.
Prosecutors accused Binance of operating like a "Wild West" model, welcoming criminals and failing to report over 100,000 suspicious transactions with designated terrorist groups. They also alleged that Binance facilitated the sale of child sexual abuse materials and received a significant portion of ransomware proceeds. Binance agreed to a $4.32 billion penalty.
"I'm sorry," Zhao told the judge before sentencing. "I believe the first step of taking responsibility is to fully recognize the mistakes. Here I failed to implement an adequate anti-money-laundering program. ... I realize now the seriousness of that mistake."
Prosecutors argued that a tough sentence would deter other potential criminals. "We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster," prosecutor Kevin Mosley said. "But Zhao's conduct wasn't a mistake. This wasn't a regulatory 'oops.'"
Zhao stepped down as Binance's CEO in November after admitting to evading money-laundering requirements. His lawyers requested probation, citing his acceptance of responsibility and payment of a $50 million criminal fine. They also pointed to other individuals who admitted similar wrongdoing, like BitMEX founder Arthur Hayes, who avoided prison sentences.
Defense lawyer Mark Bartlett said Zhao "wanted to make a difference in the world" but made mistakes.
Judge Jones ultimately decided against a three-year sentence, stating that prosecutors did not demonstrate Zhao's prior knowledge of the illegal activity. "It's always the case the government asks for more than they think they'll get," said Robert Frenchman, a lawyer specializing in white-collar crime. "Going that much above guidelines for a pleader is unusually aggressive."
Several other crypto moguls are currently under investigation by U.S. authorities following the collapse of crypto prices in 2022, which exposed widespread fraud and misconduct within the industry.
Zhao was released on a $175 million bond and agreed not to appeal any sentence within federal guidelines. He also paid $50 million to the Commodity Futures Trading Commission.