Changpeng Zhao, the 47-year-old former CEO of Binance, received a four-month prison sentence on Tuesday for pleading guilty to breaching U.S. anti-money laundering laws at the world’s largest cryptocurrency exchange. Known as “CZ,” Zhao, once a prominent figure in the crypto industry, became the second major crypto executive to face prison time.
U.S. District Judge Richard Jones in Seattle delivered the sentence, which was shorter than the three years sought by prosecutors and below the maximum 1-1/2 years recommended under federal guidelines. It was notably lighter than the 25-year sentence given to Sam Bankman-Fried in March for embezzling $8 billion from customers of his bankrupt FTX exchange. Bankman-Fried is appealing his conviction and sentence.
Despite the leniency of Zhao’s sentence, prosecutors welcomed the outcome of the lengthy investigation into Binance and Zhao, who had been residing beyond U.S. jurisdiction in the United Arab Emirates. Zhao, 47, showed no visible reaction upon hearing his sentence, dressed in a navy blue suit and tie, with family members, including his mother, present in the courtroom. Defense attorneys had requested probation for him.
Dennis Kelleher, head of the financial reform advocacy group Better Markets, criticized the sentence, suggesting it sends the message that “crime pays,” especially considering Zhao’s substantial wealth. Prosecutors accused Binance of operating with a “Wild West” approach that facilitated criminal activities, failing to report over 100,000 suspicious transactions involving designated terrorist organizations like Hamas, al-Qaeda, and the Islamic State. They also alleged that Binance supported the sale of child sexual abuse materials and received a significant portion of ransomware proceeds.
As part of the settlement, Binance agreed to pay a $4.32 billion penalty, and Zhao personally paid a $50 million criminal fine plus $50 million to the U.S. Commodity Futures Trading Commission. Zhao expressed remorse before the judge, acknowledging his failure to implement adequate anti-money laundering measures and recognizing the gravity of his mistakes.
Much of Binance’s wrongdoing, including its lax money laundering controls, was initially reported by Reuters. Zhao will voluntarily surrender to serve his sentence, likely at a detention center near Seattle-Tacoma International Airport.
Robert Frenchman, a lawyer specializing in white-collar crime, remarked that while neglecting compliance falls short of criminal intent, the scale of Binance’s violations warranted more than probation or home detention. Prosecutors emphasized that a tough sentence would deter potential criminals.
Zhao resigned as Binance’s CEO in November, admitting to evading money-laundering requirements under the Bank Secrecy Act. Defense lawyers argued that others who confessed to similar offenses, such as BitMEX founder Arthur Hayes, were not incarcerated.
Despite prosecutors’ request for a three-year sentence, Judge Jones deemed it inappropriate, as they failed to demonstrate that Zhao was aware of illegal activity in advance. The aggressive sentencing stance was noted by Frenchman, who observed that the government often seeks more than it anticipates receiving.
Following the crypto market crash in 2022, several other crypto executives are under scrutiny by U.S. authorities for fraudulent activities and misconduct.