Binance founder, Changpeng Zhao (CZ) has been sentenced to four months in prison by a US court.
The Binance founder was sentenced to four months in prison for failing to establish adequately anti-money laundering protections. CZ, once the head of the largest crypto exchange in the world, pleaded guilty in November 2023.
While delivery the sentence, at a federal high court in Seattle, Washington on Tuesday, Judge Richard Jones said CZ prioritized “Binance’s growth and profits over compliance with US laws and regulations.”
U.S. prosecutors had recommended a 36-month sentence for Zhao.
The crypto billionaire stepped down as Binance’s CEO as part of his agreement with the Justice Department.
In November, Zhao, commonly known as CZ, struck a deal with the U.S. government to resolve a multiyear investigation into Binance, the world’s largest cryptocurrency exchange. As part of the settlement, Zhao stepped down as the company’s CEO. Though he is no longer running the company, Zhao is widely reported to have an estimated 90% stake in Binance.
Zhao, who wore a dark navy suit with a light blue tie to court, is accused of willfully failing to implement an effective anti-money laundering program as required by the Bank Secrecy Act, and of allowing Binance to process transactions involving proceeds of unlawful activity, including between Americans and individuals in sanctions jurisdictions.
The U.S. ordered Binance to pay $4.3 billion in fines and forfeiture. Zhao agreed to pay a $50 million fine.
Binance has separately been sued by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission over the alleged mishandling of customer assets and the operation of an illegal, unregistered exchange in the U.S.
The action against Binance and its founder was a joint effort by the Department of Justice, the CFTC and the Treasury Department, though the SEC was notably absent.
Changpeng Zhao, the founder of the Binance cryptocurrency exchange, walking into the federal courthouse in Seattle on Tuesday to face sentencing
A Binance spokesperson said in a statement to CNBC that the crypto exchange is “proud of the culture of compliance, security, and transparency we have created over the past several years, and we look forward to building on that culture as we continue to evolve.”
The spokesperson said the company has made “considerable compliance enhancements,” including with regards to anti-money laundering detection and “hiring key compliance personnel.”
A lawyer for Zhao did not immediately respond to CNBC’s request for comment.
Prosecutors say Zhao violated U.S. law on an “unprecedented scale,” and that he had a “deliberate disregard” for Binance’s legal responsibilities.
In a memorandum on Apr. 23, prosecutors said that under Zhao’s control, Binance operated on a “Wild West” model.
“Zhao bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime,” the memorandum stated. “But Zhao was caught, and now the Court will decide what price Zhao should pay for his crimes.”
Zhao has gotten off much easier than former crypto rival Sam Bankman-Fried, the founder and ex-CEO of FTX.
Bankman-Fried was sentenced to 25 years in prison for crimes connected to the operation of his crypto exchange. Unlike Zhao and the charges brought against Binance, Bankman-Fried’s bankrupt exchange faced allegations of fraud and misuse of customers funds.
Braden Perry, a former senior trial lawyer for the CFTC, said that behavior is typically viewed as more deceitful and financially damaging to a broader array of people than compliance failures.
“CZ’s case seems to focus on regulatory and compliance failures, while SBF’s case hinges on direct financial misconduct and deception,” continued Perry. “Compliance failures, while serious, might be seen as a failure of oversight rather than active malfeasance.”
