Four-month sentence for CZ, the former CEO of Binance
According to the US, he avoided transactions that aided “terrorism,” the illegal drug trade, and child sex abuse.
The world’s largest cryptocurrency exchange’s former CEO, Changpeng Zhao, admitted guilt to breaking US money-laundering rules and was sentenced to four months in prison on Tuesday.
United States District Judge Richard Jones of Seattle handed down the punishment after turning down the prosecution’s plea for 47-year-old Zhao to serve a three-year sentence.
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Zhao, often known as “CZ,” was formerly regarded as the most influential person in the bitcoin sector. Following Sam Bankman-Fried, he is the second prominent cryptocurrency leader to receive a prison sentence. In March, Bankman-Fried was sentenced to 25 years in prison for embezzling eight billion dollars from clients of his defunct FTX transaction platform.
Zhao resigned after Binance agreed to pay $4.3 billion to settle related claims after entering a guilty plea to one count of neglecting to adopt necessary anti-money-laundering measures in November.
According to US officials, Zhao purposefully turned a blind eye to transactions that financed “terrorism,” the illegal drug trade, and child sex abuse.
Before US District Judge Richard A. Jones handed down the punishment, Zhao spoke the words, “I failed here.” “I sincerely apologize and regret my mistake.”
“I think that acknowledging one’s own mistakes is the first step towards accepting responsibility. In this case, I did not put in place a sufficient anti-money-laundering program. I now understand how significant that error was,” he remarked.
The judge was informed by the prosecution that sent a strong message to other potential offenders
“Prosecutor Kevin Mosley stated, “We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster.” However, Zhao claimed that his actions “weren’t an error.”
This was not a “oops” in the regulations prosecutors requested a three-year prison sentence, which was more than double the recommended penalty for the offense. They contended that no one would enforce the law if he was not sentenced to time in jail for the offense.
Zhao had been free on a $175m bond, and agreed not to appeal any sentence within federal guidelines. Zhao also paid $50m to the Commodity Futures Trading Commission.
Tansactions that go against US sanctions
More than 1.5 million virtual currency exchanges worth around $900 million that broke US sanctions were approved by Binance, including transactions involving Iran, al-Qaeda, and the Qassam Brigades of Hamas.
“The United States Department of Justice stated in a sentencing memorandum submitted last week that “he made a business decision that violating US law was the best way to attract users, build his company, and line his pockets.”
Before stepping down, Zhao started making modifications to make Binance a model of compliance with financial transparency requirements. Defense attorneys Mark Bartlett and William Burck informed the judge that no one had ever been sentenced to prison time for identical violations of the Bank Secrecy Act.
Zhao told the court in a letter, “There is no excuse for my failure to establish the necessary compliance controls at Binance.” “I wish I could alter that passage in Binance’s narrative. However, since 2022, Binance has been operating with the strictest anti-money laundering regulations of any non-US exchange, thanks to my leadership.
No one had ever broken the Bank Secrecy Act to the extent that Zhao did, according to the prosecution.
“He says he should have done a better job in hindsight,” attorney Kevin Mosley of the Justice Department said in court. This wasn’t an error. Mr. Zhao knew exactly what was expected of him when he broke the BSA”.
Prosecutors claim Zhao gave the order to have Binance conceal customers’ locations within the US even though he knew the company needed to implement anti-money-laundering procedures.
Following the 2022 cryptocurrency price collapse, which revealed widespread fraud and malfeasance in the sector, a number of other prominent figures in the space are also under investigation by US authorities.
