Last week, the founder of Binance, Changpeng Zhao, was sentenced to four months in prison on Tuesday, 30th of April 2024. It happened after the former CEO pleaded guilty in November 2023, for allowing anti-money laundering in the world’s leading cryptocurrency exchange platform.
At that time, Zhao, commonly referred to as CZ requested the government to make a deal according to which he shall sign off from his position as the CEO of Binance, and as a settlement, the U.S government would resolve the multilayer investigation that would surely take down Binance.
Zhao, 47, had stepped down from his position after he admitted to his non-compliance with the U.S. laws. Reportedly, similar news was everywhere like wildfire about the recently fallen cryptocurrency fraudulent, Sam Bankman Fried whose FTX exchange collapsed in 2022. He was charged with money laundering and committing fraud, which led him to a 25-year sentence.
While prosecutors requested a 36-month for Zhao, one that is likely to match the sentencing of Bankman for a similar crime, the judge, Richard A. Jones had thought that the 47-year-old former CEO was not likely to re-offend. The prosecutor highlighted Zhao’s doings as intentional and said that he purposely violated U.S. laws for the growth of his company, which he founded in 2017.
According to the prosecutor, “Zhao’s willful violation of U.S. law was no accident or oversight. He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets.”
However, according to the courtroom reporting from CoinDesk, Judge Richard Jones, who handles the US district for the district of Washington did not agree with the three years imprisonment as he believed that Zhao was not informed about the illegal activities happening in his company.
While prosecution argued for a 3-year imprisonment for Zhao that shall be double the 18 months imprisonment recommended by the Federal Guidelines in order to set a rule for everyone that no matter what the situation, “the right choice is to comply with the US law.”
In response to this, the defense requested the court to sentence him to five months’ probation and mentioned that he ‘deeply regrets his offense’ and is willing to take complete responsibility for his doings.
In proof of this, Zhao wrote in his letter to the judge, “Words cannot explain how deeply I regret my choices that result in me being before the Court. Rest assured that it will never happen again.”
Zhao’s lawyer, William Burck said, “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.” He also highlighted in the court that seized can go through certain security risks in the prisoner’s facility due to his popularity and his wealth.
Details Of the Money-Laundering Case
Last year, in November, Binance was sued by the U.S. Commodity Features Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) for its illegal operations. According to the investigation, the company permitted bad actors and other criminals to carry on transactions that related to child abuse, narcotics, and other terrorist activities.
Moreover, Binance had no protocols that may flag any kind of money laundering activities or unauthorized transactions. This allowed criminals to easily make their way to the platform and resulted in more than 100K suspicious transactions. It included $1.5 million virtual currency trades which was equivalent to almost 900 million U.S. dollars. The memorandum highlighted the company as operating on a ‘Wild West’ model.
Further, according to a staffer at Binance, the company needs a banner saying ‘Is washing drug money too hard these days – come to Binance we got cake for you.’
The memorandum also stated that “Zhao bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime. But Zhao was caught, and now the Court will decide what price Zhao should pay for his crimes.”
Hence, for all these wrongdoings, The US government charged Binance a fine of $4.3 billion and separately charged Zhao a fine of $50 million as a penalty. All the actions that were taken against Binance and CZ were the result of the joint efforts of the Department of Justice (DoJ), the Treasury Department, and the CFTC.
Also, during his hearing in the court, Zhao, who wore a dark navy-blue suit with a blue tie told Judge Richard Jones, “I’m sorry.”
While accepting his mistakes, he apologized “I believe the first step of taking responsibility is to fully recognize the mistakes. Here I failed to implement an adequate anti-money laundering program… I realize now the seriousness of that mistake.”
Effect Of the Case on Zhao
Zhao, a Chinese Canadian citizen, is a graduate of computer science and worked as a programmer for Bloomberg and the Tokyo Stock Exchange before he established his company. Not being a citizen of the US when is fever during his hearing at the court. His defense lawyers had a strong reason to keep him from being sentenced to a minimum-security facility as it may be unsafe for him.
His lawyer also mentioned him being guilty of all his mistakes. In a letter to the judge, CZ wrote, “I apologise for my poor decisions and accept full responsibility for my actions. In hindsight, I should have focused on implementing compliance changes at Binance from the get-go, and I did not.” He further promised to make sure that such actions will not happen in the future and he will try his best to help as many people as possible, especially the poor and needy ones.
In addition to this, the judge received more than 160 letters of support from his friends and family. One of his friends mentioned that Zhao is “capable of learning from this experience, making amends, and becoming a productive member of society.”
Regardless of this fine, Zhao’s fortune remains intact he’s the owner of the $2.5 trillion cryptocurrency cornerstone. According to the Billionaires Index by Bloomberg, Changpeng Zhao is the 29th richest person all over the world with a net worth of $41.6 billion.
Now What?
After CZ, the new Richard Teng has been appointed as the new CEO of Binance, he has been performing flawlessly as the head of Regional Markets at the exchange. He has been promoted for his regulatory background and has recently announced in a conference that they are considering ‘a few jurisdictions’ at the global Binance headquarters.
According to reports, the market share of Binance has dropped from 56.5% to 45.4%, still making it a market-leading firm currently. Unfortunately, many investors according to publishers have “lost trust in Binance as a safe place for their assets.”
In a recent conference, a spokesperson from the company said that the firm is “proud of the continued evolution of our business as we move past historical compliance issues and continue to deliver for our users worldwide.”
This is a wrap-up of the hearing and sentencing of Changpeng Zhao and Binance.
In the crypto world, the back-to-back cases of fraud have activated the Department of Justice at a higher level, especially in the areas of virtual currencies. While many may find the decision fair enough, many crypto skeptics are not satisfied with the less-than-expected imprisonment of Changpeng Zhao.
According to the CEO of Better Markets, Dennis Kelleher, the complete situation has been dealt with as a ‘miscarriage of justice’ as there was no trial held for other employees as Binance. After the hearing, he said in a statement, “‘Crime pays’ is the message sent today.”
As per his statement, the Department of Justice “Didn’t even charge CZ with money laundering; he was only charged with not having an anti-money laundering program. That’s less than a slap on the wrist.”
Further, in a memorandum, he wrote “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.”
To know more about CZ and Binance, stay tuned to our page.
