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Binance founder Changpeng Zhao was ordered to spend four months in prison for failures that allowed cybercriminals and terrorist groups to freely trade on the world’s largest cryptocurrency exchange.
Zhao, 47, was sentenced Tuesday by US District Judge Richard Jones in Seattle. Dressed in a dark suit with a light blue tie, the billionaire arrived in court flanked by half a dozen lawyers.His mother and sister watched his sentencing from the front row of the courtroom.
The sentence was far below the three years requested by prosecutors, who had sought to make an example out of Zhao to a heavily-scrutinized industry rebounding from a slew of high-profile scandals. It is the first time a chief executive officer has ever gone to jail for a bank secrecy act violation, a charge that has been used repeatedly in crypto prosecutions in recent years.
In imposing the sentence, Jones said he hoped Zhao understood that, despite “wealth, power and status,” no person is immune from prosecution or above the law. Zhao, who didn’t visibly react to the sentence, is expected to serve his four-month stint at Seattle’s Federal Detention Center, SeaTac. A date for Zhao to turn himself in to prison authorities has not been decided, although he has expressed eagerness to get back to his family in the United Arab Emirates.
The sentence wraps up a yearslong probe by the Justice Department that cast a shadow over Binance and the man known as ‘CZ’, one of the industry’s most recognizable figures. The case also comes off the back of the 25-year prison sentence handed to Sam Bankman-Fried, a former crypto titan who stole billions of dollars from FTX customers.
Zhao’s lawyers said he couldn’t serve time in a minimum-security facility, where most white collar defendants end up, because he wasn’t a US citizen. That put him at a greater risk than other inmates, his lawyers argued as they implored Jones to spare him from prison.
‘Unprecedented’
Zhao’s attorneys pointed to cases involving similar banking law violations that resulted in probation, like the prosecution of crypto platform BitMEX executives. But Jones said this particular crime was “unprecedented” as it involved millions of dollars and led to illicit actors, including terrorists and hackers, moving funds across Binance.
Zhao pleaded guilty in November for failing to implement an adequate money laundering program at Binance, an exchange that began in Shanghai in 2017 and ballooned to process trillions of dollars worth of trades each year. At the same time, Binance pleaded guilty to anti-money laundering and sanctions law violations and agreed to pay $4.3 billion to resolve investigations with the Justice Department and other US regulators.
Zhao, who moved from China to Canada at age 12 and later settled in Dubai, has been barred from leaving the US since then. Addressing the judge on Tuesday, he expressed remorse and said he had traveled to Seattle last November to plead guilty instead of staying at his home in the UAE, which doesn’t have an extradition treaty with the US.
“I left my family to come to the US to take responsibility for my actions,” Zhao said. “That’s because responsibility is a core value for me, and I live by that.” He described a life outside of crypto next, focusing on a philanthropic education project.
Regulatory ‘Oops’
While federal sentencing guidelines called for a punishment up to 18 months in prison, the US government pushed for more. Federal prosecutor Kevin Mosley said the Binance founder’s violations of US law were intentional, not an oversight.
“This wasn’t a mistake,” Mosley said. “It wasn’t a regulatory ‘oops.’” But he also said the sentence the US sought was proportionate. Mosley said the government wasn’t suggesting Zhao’s crimes were comparable to Bankman-Fried and also wasn’t “trying to kill the crypto industry.”
He zeroed in on a phrase Zhao used years prior: “It’s better to ask for forgiveness than permission.”
By not asking for permission, Mosley argued, Zhao made his company great and rose to fame, becoming a crypto celebrity while sidestepping US compliance laws. The failure to maintain an adequate money laundering program opened the door to illicit actors, including crypto mixers, hackers and terrorist groups including al-Qaeda and ISIS, to trade Bitcoin on the platform.
Terrorist groups
In an example detailed by the Financial Crimes Enforcement Network, or FinCEN, the al-Qassam Brigades, the military wing of Hamas, used Bitcoin transactions to raise money for the Palestinian resistance. Hamas, which has been designated by the US as a terrorist organization, murdered more than 1,200 Israelis on Oct. 7.
The lack of proper compliance led to some customers trading with residents of Iran in contravention of US sanctions. Between 2018 and 2022, Binance processed at least 1.1 million transactions that violated U.S sanctions, worth about $898 million, according to the government’s memo.
While Zhao stepped down as CEO as part of his plea deal with the government, he continued to own the company and will “profit handsomely,” Mosley said, arguing that a fine alone was insufficient.
The judge said he was also troubled by the ‘better to ask for forgiveness than permission’ statement, pointing to the irony of Zhao now coming before him to ask for forgiveness.
Zhao’s lawyer Mark Bartlett said he couldn’t think of anything else a person could do to show their remorse.
“Did he make mistakes? Absolutely, that’s why we are here,” Bartlett said.
Some of that was financially motivated, he said, but Zhao got into crypto “to change the world.”
Despite Zhao’s well-publicized criminal case, he has held onto his personal fortune. His wealth ballooned by $25 billion as the crypto industry recovered last year and he is currently ranked as the 42nd richest person in the world, according to Bloomberg Billionaires Index.
Zhao, 47, was sentenced Tuesday by US District Judge Richard Jones in Seattle. Dressed in a dark suit with a light blue tie, the billionaire arrived in court flanked by half a dozen lawyers.His mother and sister watched his sentencing from the front row of the courtroom.
The sentence was far below the three years requested by prosecutors, who had sought to make an example out of Zhao to a heavily-scrutinized industry rebounding from a slew of high-profile scandals. It is the first time a chief executive officer has ever gone to jail for a bank secrecy act violation, a charge that has been used repeatedly in crypto prosecutions in recent years.
In imposing the sentence, Jones said he hoped Zhao understood that, despite “wealth, power and status,” no person is immune from prosecution or above the law. Zhao, who didn’t visibly react to the sentence, is expected to serve his four-month stint at Seattle’s Federal Detention Center, SeaTac. A date for Zhao to turn himself in to prison authorities has not been decided, although he has expressed eagerness to get back to his family in the United Arab Emirates.
The sentence wraps up a yearslong probe by the Justice Department that cast a shadow over Binance and the man known as ‘CZ’, one of the industry’s most recognizable figures. The case also comes off the back of the 25-year prison sentence handed to Sam Bankman-Fried, a former crypto titan who stole billions of dollars from FTX customers.
Zhao’s lawyers said he couldn’t serve time in a minimum-security facility, where most white collar defendants end up, because he wasn’t a US citizen. That put him at a greater risk than other inmates, his lawyers argued as they implored Jones to spare him from prison.
‘Unprecedented’
Zhao’s attorneys pointed to cases involving similar banking law violations that resulted in probation, like the prosecution of crypto platform BitMEX executives. But Jones said this particular crime was “unprecedented” as it involved millions of dollars and led to illicit actors, including terrorists and hackers, moving funds across Binance.
Zhao pleaded guilty in November for failing to implement an adequate money laundering program at Binance, an exchange that began in Shanghai in 2017 and ballooned to process trillions of dollars worth of trades each year. At the same time, Binance pleaded guilty to anti-money laundering and sanctions law violations and agreed to pay $4.3 billion to resolve investigations with the Justice Department and other US regulators.
Zhao, who moved from China to Canada at age 12 and later settled in Dubai, has been barred from leaving the US since then. Addressing the judge on Tuesday, he expressed remorse and said he had traveled to Seattle last November to plead guilty instead of staying at his home in the UAE, which doesn’t have an extradition treaty with the US.
“I left my family to come to the US to take responsibility for my actions,” Zhao said. “That’s because responsibility is a core value for me, and I live by that.” He described a life outside of crypto next, focusing on a philanthropic education project.
Regulatory ‘Oops’
While federal sentencing guidelines called for a punishment up to 18 months in prison, the US government pushed for more. Federal prosecutor Kevin Mosley said the Binance founder’s violations of US law were intentional, not an oversight.
“This wasn’t a mistake,” Mosley said. “It wasn’t a regulatory ‘oops.’” But he also said the sentence the US sought was proportionate. Mosley said the government wasn’t suggesting Zhao’s crimes were comparable to Bankman-Fried and also wasn’t “trying to kill the crypto industry.”
He zeroed in on a phrase Zhao used years prior: “It’s better to ask for forgiveness than permission.”
By not asking for permission, Mosley argued, Zhao made his company great and rose to fame, becoming a crypto celebrity while sidestepping US compliance laws. The failure to maintain an adequate money laundering program opened the door to illicit actors, including crypto mixers, hackers and terrorist groups including al-Qaeda and ISIS, to trade Bitcoin on the platform.
Terrorist groups
In an example detailed by the Financial Crimes Enforcement Network, or FinCEN, the al-Qassam Brigades, the military wing of Hamas, used Bitcoin transactions to raise money for the Palestinian resistance. Hamas, which has been designated by the US as a terrorist organization, murdered more than 1,200 Israelis on Oct. 7.
The lack of proper compliance led to some customers trading with residents of Iran in contravention of US sanctions. Between 2018 and 2022, Binance processed at least 1.1 million transactions that violated U.S sanctions, worth about $898 million, according to the government’s memo.
While Zhao stepped down as CEO as part of his plea deal with the government, he continued to own the company and will “profit handsomely,” Mosley said, arguing that a fine alone was insufficient.
The judge said he was also troubled by the ‘better to ask for forgiveness than permission’ statement, pointing to the irony of Zhao now coming before him to ask for forgiveness.
Zhao’s lawyer Mark Bartlett said he couldn’t think of anything else a person could do to show their remorse.
“Did he make mistakes? Absolutely, that’s why we are here,” Bartlett said.
Some of that was financially motivated, he said, but Zhao got into crypto “to change the world.”
Despite Zhao’s well-publicized criminal case, he has held onto his personal fortune. His wealth ballooned by $25 billion as the crypto industry recovered last year and he is currently ranked as the 42nd richest person in the world, according to Bloomberg Billionaires Index.
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