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Former Binance chief executive Changpeng Zhao has been sentenced to four months in jail after pleading guilty to failing to establish adequate money laundering controls at the world’s largest cryptocurrency exchange.
The 47-year-old, known in the crypto world as CZ, surrendered to US authorities in November. He agreed to resign as head of Binance, which he founded in 2017, while the exchange paid $4.3bn for failing to halt transactions that financed terrorist groups Hamas and al-Qaeda and sanctioned entities in Iran and Russia, among other violations.
Appearing in federal court in Seattle on Tuesday, Zhao, a Canadian national, expressed regret for not introducing tougher “know your customer” policies at Binance, according to media reports.
US prosecutors had sought a three-year prison term for Zhao, citing the need for the court to send a message “to the world”. His lawyers had insisted that probation would be sufficient for the first-time offender, citing their client’s willingness to co-operate with the Department of Justice. He was freed on a $175mn bond pending sentencing, although he had been prohibited from leaving the US.
Binance remains the world’s biggest crypto exchange but its market share has eroded from 60 per cent at the start of last year, to 42 per cent, according to figures from CCData.
Last year, the DoJ outlined how Zhao and Binance routinely ignored compliance rules, allowing nearly $900mn of deals to bypass US sanctions on Iran and millions of dollars worth of crypto to be moved between the exchange and infamous Russian darknet marketplace Hydra. The US government also detailed how the exchange was tied to other crimes, such as the narcotics trade and the sexual abuse of children.
The government’s filings were replete with inculpatory quotes from Zhao, who has been one of the most high-profile and vocal leaders of a crypto company in recent years, courting politicians and celebrities alike. Prosecutors said Zhao had told his team it was “better to ask for forgiveness than permission” and he had once bragged that if Binance would have fully complied with US law, it would not be “as big as we are today”.
The sentencing of Zhao comes amid a crackdown on the crypto industry by US authorities. But his punishment pales in comparison with the 25 years handed to his erstwhile rival Sam Bankman-Fried, the FTX founder who was found guilty of several counts of fraud and money laundering after a five-week trial in New York. Several of Bankman-Fried’s former associates have also pleaded guilty and are awaiting sentencing.
The Securities and Exchange Commission is also seeking more than $5bn in fines from collapsed crypto group Terraform Labs and its co-founder Do Kwon, who is also facing criminal charges. Earlier this month crypto trader Avraham Eisenberg was found guilty of defrauding the Mango Markets exchange and its investors out of $110mn.
More than 160 of Zhao’s friends and family had written letters to the judge ahead of the sentencing, in an attempt to persuade him to be lenient. “His biggest mistake was ignorance,” wrote Yi He, chief customer service officer at Binance, and mother of three children with Zhao.
