Binance Founder Sentenced to 4 Months in Prison

Binance Founder Sentenced to 4 Months in Prison

By Oghale Apr30,2024

Changpeng Zhao, the billionaire founder of the giant cryptocurrency exchange Binance, was sentenced on Tuesday to four months in prison, a much lighter penalty than other crypto executives have faced since the industry imploded in 2022.

After Mr. Zhao pleaded guilty to money-laundering violations last year, prosecutors requested a three-year sentence, while defense lawyers asked for probation without any prison time.

Judge Richard A. Jones, who oversaw the case in U.S. District Court in Seattle, said in court on Tuesday that he was “confident” Mr. Zhao would not break the law again. “You’re a dedicated family man and a giving person,” he said.

Wearing a dark suit and light blue tie, Mr. Zhao, 47, did not visibly react as the sentence was announced. But he nodded vigorously during Judge Jones’s statement and touched his hand to his heart.

“I failed here,” Mr. Zhao said in brief remarks to the court. “I deeply regret my failure, and I’m sorry.”

Mr. Zhao’s sentencing was the second high-profile penalty this year in the Justice Department’s campaign to root out criminal behavior in the crypto industry. In March, Sam Bankman-Fried, the founder of the collapsed FTX exchange and Mr. Zhao’s onetime business rival, was sentenced to 25 years in prison for fraud.

Not long ago, Mr. Zhao and Mr. Bankman-Fried stood atop the multitrillion-dollar crypto industry. Binance was the largest crypto company in the world, processing as much as two-thirds of all transactions. But it also faced investigations by several U.S. agencies into whether Mr. Zhao had broken the law to build his empire.

Facing intense legal scrutiny, Mr. Zhao, who goes by the initials CZ, was often dismissive. He described the concerns about Binance as “FUD,” or fear, uncertainty and doubt — shorthand in the crypto world for false rumors intended to hurt a business.

In November 2022, Mr. Zhao’s industry power increased after he helped bring down Mr. Bankman-Fried with a series of social media posts that prompted a run on FTX’s accounts. When FTX didn’t have the money to repay its customers, Mr. Zhao briefly agreed to buy the exchange, before pulling out of the deal. Soon Mr. Bankman-Fried was arrested on fraud charges.

A year later, it was Mr. Zhao’s turn to face criminal prosecution.

In November, Binance agreed to pay $4.3 billion to several U.S. agencies, including the Justice Department, to settle charges that it had permitted terrorist organizations like Hamas, the Islamic State and Al Qaeda to use its platform. Prosecutors said that, under Mr. Zhao’s watch, Binance had refused to comply with American sanctions, allowing access to customers in countries like Iran, Syria and Cuba. The company also failed to report suspicious transactions involving narcotics and child sexual abuse materials, the government said.

Mr. Zhao told Binance employees that it was “better to ask for forgiveness than permission,” prosecutors said in a recent court filing. He also bragged that if Binance had complied with U.S. law, it would not be “as big as we are today,” the prosecutors wrote.

In the end, Mr. Zhao pleaded guilty to a single criminal count, admitting that he had failed to establish an adequate anti-money-laundering system at Binance. He also resigned as chief executive and agreed to a $50 million fine. He has a $33 billion fortune, according to Forbes, making him crypto’s wealthiest executive.

In court filings last week, prosecutors said the crime carried a sentence of 12 to 18 months under federal guidelines. But they asked Judge Jones to impose a prison term of three years, arguing that Mr. Zhao had violated the law “on an unprecedented scale.”

“This wasn’t a mistake — it wasn’t a regulatory oops,” Kevin Mosley, a lawyer in the Justice Department’s money-laundering section, said in court on Tuesday. “Breaking U.S. law was not incidental to his plan to make as much money as possible. Violating the law was integral to that endeavor.”

Defense lawyers countered that Mr. Zhao had demonstrated remorse and accepted responsibility for his crime, and shouldn’t face any time behind bars. They said Mr. Zhao had not been charged with fraud or stealing anyone’s money, the crimes that Mr. Bankman-Fried committed. And they cast Mr. Zhao as a committed philanthropist who intended to give away the vast majority of his wealth.

In the courtroom, William Burck, a lawyer for Mr. Zhao, argued that the three-year recommendation was significantly harsher than penalties faced by other defendants charged with similar offenses. Mr. Burck called the prosecution’s sentencing submission “extraordinarily punitive and completely unfair.”

Since his guilty plea, Mr. Zhao has remained in the United States, after Judge Jones rejected his request to return home to Dubai before the sentencing. He has spent the last few months traveling widely in the United States, including to New York, Los Angeles and Telluride, Colo.

He has also laid the groundwork for his next act. In April, he unveiled an online education platform called Giggle Academy, which he said would involve artificial intelligence and nonfungible tokens, the crypto collectibles known as NFTs. And he has spoken with start-ups working in biotechnology, an area in which he’s interested in investing.

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By Oghale

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