Binance Founder Changpeng Zhao Sentenced to Four Months in Prison

Binance founder Changpeng Zhao was sentenced to four months in prison for failing to establish adequate protections against money laundering. Zhao, once head of the world’s largest crypto exchange, pleaded guilty in November 2023.

Judge Richard Jones says Zhao prioritized “Binance’s growth and profits over compliance with U.S. laws and regulations.” While Jones doesn’t think Zhao is unlikely to reoffend, the scale of the crime is remarkable.

Although Zhao is not as well-known as FTX fraudster Sam Bankman-Fried, he is a more important figure in the crypto world. The Chinese-Canadian businessman founded Binance in 2017. Although he was required to step down as CEO of the exchange as part of his plea deal, he is still the controlling shareholder of the company, which one person said Bloomberg it was “a huge shitty casino.” Binance has listed many more tokens than competitors like Coinbase.

Prosecutors requested three years in prison, double the 18-month sentencing guideline, because the “scope and ramifications of Zhao’s misconduct were enormous.” they wrote in their sentencing memorandum. They also suggested that Zhao’s sentence should “reflect the significant damage to US national security caused by his criminal acts”.

Binance allowed sanctions violations worth more than $898 million, according to prosecutors, and “violated U.S. law on an unprecedented scale.” Zhao and other Binance executives failed to comply with US laws, including the Bank Secrecy Act (BSA), and failed to properly implement anti-money laundering efforts. As a result, Iranian customers were able to transact at least $1.1 million with US customers in violation of sanctions. Other sanctioned countries, such as Cuba and Syria, were also able to transact.

Zhao’s lawyers, in your own sentencing memorandum, said Zhao did not deserve prison time, as “no defendant in a remotely similar BSA case has ever been sentenced to prison.” Zhao traveled from his home in the United Arab Emirates to plead his guilt. He remained in the US “away from his home, partner and young children for five and a half months,” his lawyers wrote. Additionally, Binance has taken steps to correct its anti-money laundering procedures, they wrote.

In the crypto world, Zhao has long been known as a cowboy with a reputation for flouting US laws. In October 2021, Sam Bankman-Fried, CEO of rival exchange FTX, tweeted (and deleted) that he was “excited to see [Zhao] representing the industry in DC going forward! uh, he’s still allowed to go to DC, right? A week after that, Zhao tweeted that he would sell his holdings in the FTX token in response to a blockbuster story in CoinDesk. As Binance was one of the first investors in FTX, this was quite a considerable amount. “We will not support people who lobby other industry players behind their backs,” Zhao said he said.

Zhao has already agreed to pay a fine of US$50 million, a pittance compared to the estimated amount. Net worth of US$33 billion he did with Binance. He also agreed not to appeal any sentence up to 18 months.