The founder of the world’s largest cryptocurrency exchange has been sentenced to four months in prison for allowing money launderers to operate virtually unchecked on his platform.
Changpeng Zhao pleaded guilty to one count of failing to take required anti-money-laundering measures last November, the same month he resigned from Binance. The company has since agreed to pay a $4.3 billion fine in federal court to settle a lawsuit brought last June by the Commodity Futures and Trading Commission.
As he sentenced Zhao, U.S. District Judge Richard A. Jones noted he’d prioritized “Binance’s growth and profits over compliance with U.S. laws and regulations,” according to The Verge.
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“I failed here,” the Chinese-Canadian mogul, also known as CZ, said in court on Tuesday, according to the Associated Press. “I deeply regret my failure, and I am sorry.”
Prosecutors had sought a three-year prison term, far above the recommended guideline, and pay a $50 million fine for looking the other way as Binance allowed “money to flow to terrorists, cybercriminals, and child abusers through its platform,” as Treasury Secretary Janet Yellen put it last year.
In a sentencing memorandum last week, Justice Department lawyers said Zhao’s “willful violation of US 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.”
Zhao’s lawyers had pushed for five months of probation, arguing that no defendant in a “remotely similar” case had ever been sentenced to jail. But prosecutors pointed to the need to set a precedent, saying incarceration was necessary to “deter others who are tempted to build fortunes and business empires by breaking US law.”
Zhao founded Binance in 2017. He remains listed on the Bloomberg Billionaires Index, which reports that he maintains an 86 percent stake in the exchange. Forbes calculated this week that he was the world’s 50th richest person, with an estimated net worth of $33 billion. That does not include his direct holdings in cryptocurrency, which are unknown.
Zhao played a role in the demise of his former nemesis Sam Bankman-Fried, whose trading platform FTX imploded in November 2022. That month, after an unflattering article on FTX’s balance sheet was published by CoinDesk, Zhao announced that Binance would sell its stockpile of FTT tokens, which were linked to FTX. The move intensified panic by the firm’s customers, who quickly sought to withdraw their assets en masse.
As the meltdown worsened, Binance briefly stepped in and offered to rescue FTX, throwing a last-minute lifeline to Bankman-Fried and his investors. But the next day, on Nov. 9, it rescinded the offer, declaring that “corporate due diligence” and “news reports regarding mishandled customer funds” had made the deal unpalatable. “Sad day,” Zhao added in a Twitter post.
The following year, Bankman-Fried stood trial in a federal courthouse in Manhattan. It took the jury just hours to find him guilty on all seven fraud and conspiracy counts, and Judge Lewis Kaplan sentenced him to 25 years in prison this March. Unlike Zhao, he was also forced to forfeit billions of dollars in assets.
