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Former Binance CEO CZ sentenced to four months | Cryptocurrency News
The United States has said it does not look at transactions that support child sexual abuse, illegal drug trafficking and “terrorism.”
Changpeng Zhao, the former chief executive of Binance, was sentenced to four months in prison on Tuesday after pleading guilty to violating US money laundering laws at the world’s largest cryptocurrency exchange.
The sentence was handed down by U.S. District Judge Richard Jones in Seattle, who rejected the prosecution’s request to sentence the 47-year-old Zhao to serve a three-year sentence.
Once considered the most powerful person in the cryptocurrency industry, Zhao, known as “CZ,” is the second major cryptocurrency boss to be sentenced to prison after Sam Bankman-Fried. In March, Bankman-Fried was sentenced to 25 years behind bars for stealing eight billion dollars from customers of his now-bankrupt FTX exchange.
Zhao pleaded guilty in November to a charge of failing to take required anti-money laundering measures and resigned when Binance agreed to pay $4.3 billion to settle the related charges.
U.S. officials said Zhao deliberately looked the other way as people conducted transactions supporting child sexual abuse, illegal drug trafficking and “terrorism.”
“I failed here,” Zhao said before US District Judge Richard A Jones handed down the sentence. “I deeply regret my failure and am sorry.”
“I believe the first step to taking responsibility is to fully acknowledge mistakes. I failed to implement an adequate anti-money laundering program here… I now realize the gravity of that mistake,” she said.
Prosecutors had told the judge that a tough sentence would send a clear signal to other potential criminals.
“We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster,” prosecutor Kevin Mosley said. But Zhao’s conduct, he said, “was not a mistake. This was not a regulatory ‘oops’.”
The three-year prison sentence sought by prosecutors was more than double the range for the crime. If he had not received prison time for the crime, no one would have done so, rendering the law ineffective, they argued.
Zhao was free on $175 million bail and agreed not to appeal any sentences under federal guidelines. Zhao also paid $50 million to the Commodity Futures Trading Commission.
Trade in violation of US sanctions
Binance enabled more than 1.5 million virtual currency trades, totaling nearly $900 million, that violated US sanctions, including those involving Hamas’ Qassam Brigades, al-Qaeda and Iran.
“He made the business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets,” the U.S. Department of Justice wrote in a sentencing memorandum filed last week.
Zhao’s lawyers insisted he should receive no prison time, citing his willingness to come from the United Arab Emirates, where he and his family live, to the United States to plead guilty, despite the lack of a treaty of extradition between the United Arab Emirates and the United States.
No one has ever been sentenced to prison for similar violations of the Bank Secrecy Act, defense lawyers Mark Bartlett and William Burck told the judge Tuesday, and Zhao has begun making changes to make Binance a model of compliance with bank transparency rules before resign.
“There is no excuse for my failure to establish the necessary compliance controls on Binance,” Zhao wrote in a letter to the court. “I wish I could change that part of Binance’s story. But under my direction, Binance has now implemented the most stringent anti-money laundering controls of any non-US exchange, and those controls have been in place since 2022.”
Prosecutors said no one had ever violated the bank secrecy law to the extent that Zhao did.
“He says in hindsight he should have done a better job,” Justice Department lawyer Kevin Mosley told the court. “This was not a mistake. When Mr. Zhao violated the BSA he was well aware of the requirements.”
Zhao knew Binance was supposed to set up anti-money laundering protocols, but instead ordered the company to mask customers’ locations in the United States to avoid complying with U.S. law, prosecutors said.
Many other cryptocurrency tycoons are also in the crosshairs of US authorities after the collapse in cryptocurrency prices in 2022 exposed fraud and misconduct across the industry.