Crypto Entrepreneur Changpeng Zhao Faces Prison Time for Money Laundering at Binance

Cryptocurrency entrepreneur Changpeng Zhao (also known as CZ) is set to learn his punishment for admitting to enabling money laundering at Binance, the largest centralized crypto exchange in the world. Since pleading guilty last November, U.S District Judge Richard Jones has been weighing an appropriate sentence for Zhao. Prosecutors have accused him of violating anti-money laundering laws and allowing transactions involving proceeds from criminal activity on Binance’s platform, including between Americans and individuals in sanctioned jurisdictions. Despite the collapse of rival exchange FTX into bankruptcy following founder Sam Bankman-Fried’s arrest for fraud charges, Binance has continued to operate. The value of assets held by Binance reached over $122 billion as of March 2023, according to data from blockchain firm Nansen – an almost 88% increase since Zhao stepped down as CEO in November following his guilty plea. Prosecutors have described the scale of CZ’s crimes as “unprecedented”, adding that he exhibited a ‘deliberate disregard” for Binance’s legal responsibilities, operating it on a “Wild West” model. In response to this criticism and ahead of sentencing next week, over 160 supporters have written letters to the court in support of Zhao’s case. CZ has agreed to pay $50 million as part of his plea deal with authorities, while Binance was ordered to pay a total fine of $4.3 billion for violating US banking secrecy laws and sanctions on Iran by several regulatory bodies including the Justice Department, Commodity Futures Trading Commission (CFTC), Treasury Department, and Securities Exchange Commission (SEC). Most legal experts predict that CZ will serve some time in prison as a result of his crimes. Former federal prosecutor Neama Rahmani expects him to receive between one and two years behind bars due to the gravity of his offences. Bradley Perry also predicted sentencing guidelines of ten-16 months for CZ, however he noted that factors such as accepting responsibility, settling with regulatory bodies, and avoiding a trial could influence Judge Jones’ decision in favour of a lower sentence. Yesha Yadav suggested that the judge may impose a low single digit term (around three years) including both prison time and probationary measures, while former federal prosecutor Paul Tuchmann believes CZ will receive some jail-time due to his failure to implement AML requirements coupled with Binance’s vast number of funds flowing through its platform without such controls. Los Angeles corporate law attorney Tre Lovell suggested a five to seven month prison sentence followed by an extended period on probation, indicating that charges of fraud – levied against rival crypto mogul Bankman-Fried – have not been made against CZ. David Weinstein believes the punishment will fall just short of one year as this is important in setting an appropriate deterrent for others operating within the financial sector and cryptocurrency industry more broadly.