Binance’s CEO Changpeng Zhao, known as CZ, was sentenced to four months in prison on Tuesday after pleading guilty to charges related to failing to prevent money laundering through his cryptocurrency exchange.
During the sentencing in a Seattle federal courtroom, U.S. District Judge Richard Jones criticized Zhao’s oversight of regulatory compliance, highlighting that his resources and team should have ensured adherence to all regulations. Zhao received a lighter sentence than the three years sought by federal prosecutors, although the defense had proposed only five months of probation. Sentencing guidelines recommended 12 to 18 months of incarceration.
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Before his sentencing, Zhao expressed remorse to the court, saying, “I’m sorry. Recognizing the mistakes is the first step towards taking responsibility. I failed to enforce an adequate anti-money laundering protocol, and I understand the gravity of that failure now,” according to Reuters.
In November, Zhao concluded a plea agreement with the U.S. government, concluding a lengthy investigation into Binance by stepping down as CEO of the world’s leading cryptocurrency exchange. Despite no longer leading Binance, Zhao retains an estimated 90% ownership stake in the company.
The charges against Zhao were centered on his failure to establish a robust anti-money laundering strategy as mandated by the Bank Secrecy Act and allowing Binance to facilitate transactions linked to criminal activities, including interactions between U.S. citizens and sanctioned regions.
As part of the settlement, Binance was ordered to pay $4.3 billion in penalties and forfeitures, with Zhao personally agreeing to a $50 million fine.
Additionally, Binance faces lawsuits from the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission concerning alleged mismanagement of customer assets and operating without proper registration in the U.S.
“We take pride in the compliance, security, and transparency culture we’ve built over the years and are committed to further enhancing these aspects.”
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The company also emphasized its recent compliance improvements and additions to its compliance staff.
Prosecutors characterized Zhao’s violations as “unprecedented” and accused him of flagrantly ignoring legal responsibilities, branding Binance’s operations under his leadership as akin to the “Wild West.”
The case against Binance and Zhao involved collaboration among the Department of Justice, the CFTC, and the Treasury Department, with the SEC not participating.
Zhao’s sentence contrasts sharply with that of Sam Bankman-Fried, the former CEO of the now-bankrupt FTX, who received a 25-year sentence for fraud and misuse of customer funds—charges seen as more directly harmful financially and more deceitful than regulatory non-compliance.
