KEY POINTS
- After admitting to money laundering violations in November, Binance founder Changpeng Zhao was given a four-month prison term on Tuesday.
- Although U.S. prosecutors proposed a 36-month sentence, Zhao received less.
- Following his legal agreement with the Justice Department, the cryptocurrency billionaire resigned as CEO of Binance.
On Tuesday, Changpeng Zhao, the billionaire founder of Binance, received a four-month prison sentence after he confessed to facilitating money laundering through his cryptocurrency exchange.
U.S. District Judge Richard Jones remarked in a Seattle federal court, “You possessed the resources, financial capability, and personnel to ensure compliance with all regulations, yet you missed that chance,” according to a report by Reuters.
Zhao’s received sentence was considerably shorter than the three years sought by federal prosecutors. His defense had suggested five months of probation instead. Sentencing guidelines recommended a prison term between 12 and 18 months.
“Iโm sorry,” Zhao expressed to the judge before the sentencing, as reported by Reuters.
“This morning in court, I acknowledged my errors, realizing the critical step in accepting responsibility,” Zhao said. “I did not establish a sufficient anti-money laundering strategy, and I now understand the gravity of this failure.”
In November, Zhao, also known as CZ, finalized an agreement with the U.S. government, ending a lengthy investigation into Binance, the largest global cryptocurrency exchange. Part of the agreement involved his resignation as CEO. Despite no longer managing the daily operations, Zhao is reported to still hold around 90% of Binance’s shares.
Accusations against Zhao included his deliberate failure to implement a robust anti-money laundering framework as mandated by the Bank Secrecy Act, and permitting Binance to handle transactions tied to criminal activities, including those involving Americans and individuals in sanctioned regions.
The U.S. has mandated Binance to forfeit $4.3 billion in fines. Zhao has agreed to a personal fine of $50 million.
Additionally, Binance is facing lawsuits from the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission concerning alleged mishandling of customer assets and operating an unlicensed exchange in the U.S.
This crackdown on Binance and Zhao was a collaborative effort by the Department of Justice, the CFTC, and the Treasury Department, with the SEC noticeably absent.
A spokesperson for Binance told CNBC, “We are committed to maintaining the culture of compliance, security, and transparency we’ve developed over recent years and plan to continue enhancing this culture.”
The company has notably improved its compliance measures, including anti-money laundering detection and the appointment of key compliance officials, the spokesperson added.
Zhaoโs lawyer has yet to respond to CNBC’s request for comment.
U.S. prosecutors have accused Zhao of violating laws on an unprecedented level, showing a blatant disregard for Binanceโs legal obligations.
A recent memorandum stated, “Under Zhao’s leadership, Binance operated akin to the Wild West. Zhao gambled on escaping detection and believed the consequences would not match the severity of the crimes. However, he was apprehended, and it is now up to the Court to decide the consequences for his actions.”
Zhao’s punishment is significantly milder compared to his former rival, Sam Bankman-Fried of FTX, who was sentenced to 25 years for his criminal activities related to his cryptocurrency exchange.