Binance CEO Changpeng Zhao Gets 4-Month Prison Sentence

Binance Founder Sentenced to Four Months in Prison for Violating US Law

On Tuesday, Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, was sentenced to four months in prison by Judge Richard Jones in the Western District of Washington. The sentence was lighter than the three years requested by the prosecution.

Zhao’s Guilty Plea and Consequences

In November, Zhao, popularly known as CZ, pleaded guilty to allowing users from sanctioned countries, such as Iran and Cuba, to access the Binance platform. As part of the plea deal, Zhao agreed to step down as Binance’s CEO, pay a personal fine of $150 million, and have the company pay a penalty of $4.3 billion.

Prosecution’s Argument and Sentencing Request

The US Department of Justice argued that Zhao’s violation of US law was intentional, stating in a court filing:

“Zhao’s willful violation of US law was no accident or oversight. He made a business decision that violating US law was the best way to attract users, build his company, and line his pockets.”

Prosecutors sought a 36-month prison sentence to deter others from breaking US law for personal gain. In contrast, Zhao’s legal counsel requested probation, noting that no defendant in a similar case had ever been sentenced to incarceration.

Factors Considered in Sentencing

According to Daniel Richman, a law professor at Columbia University and former federal prosecutor, the judge had to consider factors beyond the facts of the crime when determining an appropriate sentence for Zhao. These factors included the defendant’s character, the likelihood of recidivism, and past infractions.

Comparison to Sam Bankman-Fried’s Case

While some have drawn comparisons between Zhao’s case and that of Sam Bankman-Fried (SBF), the founder of the now-defunct cryptocurrency exchange FTX, Daniel Silva, an attorney at law firm Buchalter and former US prosecutor, notes that the similarities are limited. Zhao pleaded guilty to not following the law as a financial institution executive, while SBF was accused of improperly using customer funds and making fraudulent statements.

Zhao’s Wealth and Stake in Binance

Despite his conviction and departure from Binance in November, Zhao is reported to retain an estimated 86 percent stake in the exchange and continues to be worth tens of billions of dollars. He will not be required to forfeit this wealth as part of his sentence.

Significance of the Conviction

The Department of Justice, which had secured few landmark crypto convictions until last year, will celebrate Zhao’s conviction as a deterrent to other crypto or financial institution CEOs who may consider disregarding anti-money-laundering regulations. As Silva notes, the sentence sends a clear message, regardless of whether some may criticize it as too lenient.