Changpeng Zhao, Former Binance CEO, Receives 4 Months Jail Term

In November 2023, former Binance CEO Changpeng Zhao admitted guilt in the U.S. for offenses related to money laundering and sanctions breaches, agreeing to a $50 million penalty. Ex-Binance CEO Changpeng Zhao was sentenced to a four-month jail term in Seattle on Tuesday, having confessed to money laundering accusations.

During Tuesday's sentencing, Zhao expressed remorse and a desire to accept accountability for his "errors." He also mentioned that Binance had implemented a Know Your Customer and anti-money laundering initiative and is collaborating with law enforcement, according to The Verge. Prosecutors sought a 36-month jail term for Zhao, citing his exchange's focus on U.S. users and deliberate violation of U.S. laws.

"Zhao’s willful violation of U.S. law was no accident or oversight," prosecutors mentioned in their earlier sentencing memo. "He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets."

Judge Richard Jones of the U.S. District Court for the Western District of Washington expressed disagreement with a three-year sentence on Tuesday, indicating that Zhao was unaware of illegal activities, as reported by CoinDesk from the courtroom.

Meanwhile, Zhao's legal team sought probation for him, noting that he "deeply regrets his offense" and has acknowledged responsibility.

"Mr. Zhao is a forty-seven-year-old first-time offender. His life has been built on three pillars: devotion to his family, developing technology (and especially Binance) as a force for positive change in the world, and serving the greater good," his attorneys remarked.

Additionally, Zhao's lawyer, William Burck, highlighted the risks Zhao faces in certain detention facilities due to his prominence, wealth, and cooperation with authorities, per The Verge's reporting. In November, Zhao admitted guilt in the U.S. for not establishing an effective anti-money laundering system, agreeing to a $50 million fine. Binance settled for $4.3 billion, marking one of the largest corporate settlements in history. Zhao subsequently resigned as CEO, with Richard Teng, former CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market, taking over.

Binance is also embroiled in a legal battle with the U.S. Securities and Exchange Commission, which sued Binance Holdings and Zhao in June, accusing the crypto exchange of deceiving customers, neglecting to prevent U.S. investors from accessing Binance.com, diverting funds to Zhao's separate investment funds, and operating as an unregistered exchange.

Letters of support were submitted

Numerous letters of support, totaling over 160, were submitted last week on behalf of Changpeng Zhao. One letter, penned by long-time friends, expressed confidence in Zhao's ability to learn from the experience, make amends, and reintegrate as a productive member of society. The letter advocated for a more lenient sentence.

Dennis Kelleher, CEO of Better Markets, criticized the situation, labeling it a "miscarriage of justice." Kelleher argued that prosecutors should have pursued charges against other Binance employees as well.

"Notwithstanding the shocking, years long, egregious crimes Binance’s money laundering enabled and facilitated, the Department of Justice (DOJ) charged just one person, Binance’s Founder, Owner, and former Chief Executive Officer, Changpeng Zhao (CZ), and just one count of violating the Bank Secrecy Act for failing to ensure Binance implemented an effective anti-money laundering compliance program," Kelleher stated in a memo on Monday.

Kelleher also highlighted Zhao's considerable wealth, citing a reported net worth of approximately $42.9 billion by Bloomberg.

"Yet, for his crimes, DOJ fined him just $50 million, or just .1% of his net worth," Kelleher further remarked. "No one can seriously think that is 'significant' or that it will 'effectively punish Zhao for his criminal acts' or 'deter others,' as DOJ, Treasury and other government officials claimed."

Zhao's sentencing follows closely after his rival, former FTX CEO Sam Bankman-Fried, received a 25-year sentence. Last year, Bankman-Fried was found guilty on all seven counts related to defrauding customers, lenders, and investors of FTX.

During Bankman-Fried's sentencing, observers noted differences in remorse between Zhao and Bankman-Fried.

"CZ is in some ways much smarter than Sam Bankman-Fried," remarked Terrence Yang, managing director at Swan Bitcoin, last month. "They're both pretty evil."