U.S. Prosecutors Seek 36-Month Prison Sentence for Binance Founder Changpeng Zhao

Changpeng Zhao, the founder and former chief executive of Binance, the world’s largest cryptocurrency exchange, is facing a potential 36-month prison sentence as U.S. prosecutors argue for an above-guidelines punishment for his role in the company’s violations of federal sanctions and money laundering laws.

TLDR

• U.S. prosecutors are seeking a 36-month prison sentence for Changpeng Zhao, founder and former CEO of Binance.
• The DOJ argues that Zhao’s willful violation of U.S. law was a business decision to attract users, build his company, and increase his wealth.
• In November, Zhao pleaded guilty to anti-money laundering and sanctions violations and agreed to pay a $50 million fine, while Binance agreed to pay $4.3 billion in one of the largest corporate settlements in history.
• The DOJ claims that Binance’s platform supported the sale of child sexual abuse materials and was a recipient of a large portion of ransomware proceeds.
• Zhao stepped down as Binance’s CEO after his guilty plea, and the company appointed Richard Teng as its new CEO.

In a sentencing memo filed on Tuesday, the U.S. Department of Justice (DOJ) stated that Zhao’s willful violation of U.S. law was a deliberate business decision aimed at attracting users, building his company, and increasing his personal wealth.

The DOJ is seeking a sentence that goes beyond the 18-month maximum outlined in Zhao’s plea agreement, arguing that the scope and ramifications of his misconduct were massive and warrant a more severe punishment.

Last November, Zhao pleaded guilty to violating the Bank Secrecy Act and agreed to pay a $50 million fine. As part of the plea deal, he stepped down from his role as Binance’s CEO and ceased involvement with the company.

Binance, in turn, admitted to the violations and agreed to pay a staggering $4.3 billion penalty, which included a $1.81 billion criminal fine and $2.51 billion in restitution. This settlement ranks among the largest corporate penalties in history.

The DOJ’s filing sheds light on the extent of Binance’s alleged wrongdoings under Zhao’s leadership. Prosecutors claim that the exchange failed to report more than 100,000 suspicious transactions involving designated terrorist groups such as Hamas, al Qaeda, and the Islamic State of Iraq and Syria (ISIS).

Furthermore, the DOJ alleges that Binance’s platform supported the sale of child sexual abuse materials and was a recipient of a substantial portion of ransomware proceeds.

According to the DOJ, Zhao’s failure to implement an effective anti-money laundering (AML) program at Binance allowed illicit actors to exploit the exchange for various nefarious purposes.

These activities included operating mixing services to conceal the source and ownership of cryptocurrency, transacting in illicit proceeds from ransomware attacks, and moving funds derived from darknet market transactions, exchange hacks, and various internet-related scams.

The DOJ’s filing also criticizes the current Sentencing Guidelines for inadequately addressing the scale and severity of Zhao’s misconduct, particularly in light of the harm it caused to U.S. national security.

Prosecutors argue that an upward variance from the guidelines is necessary to effectively punish Zhao for his criminal acts and deter others who may be tempted to build fortunes and business empires by violating U.S. law.

Zhao, who remains free on a $175 million bond, had his sentencing hearing postponed from late February to April 30 by mutual agreement.

Since his initial appearance in federal court in Seattle, Washington, last year, he has been unable to return to Dubai, where his partner and some of his children reside.

Following Zhao’s departure, Binance appointed Richard Teng as its new CEO. The exchange itself pleaded guilty to charges alongside Zhao and agreed to the massive $4.3 billion fine.

As part of the settlement, Binance will be subject to reporting to a court-appointed monitor, although the monitor has yet to be named.

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