Changpeng Zhao, the billionaire founder of Binance, the world's largest cryptocurrency exchange, has been sentenced to four months in prison after pleading guilty to charges of enabling money laundering at his company. The sentencing, which took place on Tuesday in Seattle federal court, marks a significant development in the ongoing legal battles surrounding the crypto industry.
Federal prosecutors had sought a three-year prison term for Zhao, while the defense requested five months of probation. The sentencing guidelines called for a prison term of 12 to 18 months. Ultimately, U.S. District Judge Richard Jones handed down a four-month sentence, rejecting prosecutors' request for a harsher punishment.
In November, Zhao reached a settlement with the U.S. government, resolving a multiyear investigation into Binance. As part of the deal, Zhao stepped down as the company's CEO, and Binance agreed to pay $4.3 billion in fines and forfeiture. Zhao also agreed to pay a personal fine of $50 million.
Prosecutors accused Zhao of willfully failing to implement an effective anti-money laundering program as required by the Bank Secrecy Act and of allowing Binance to process transactions involving proceeds of unlawful activity, including between Americans and individuals in sanctioned jurisdictions. They argued that Zhao violated U.S. law on an "unprecedented scale" and exhibited a "deliberate disregard" for Binance's legal responsibilities.
In a memorandum on Apr. 23, prosecutors stated that under Zhao's control, Binance operated on a "Wild West" model. "Zhao bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime," the memorandum read. "But Zhao was caught, and now the Court will decide what price Zhao should pay for his crimes."
Zhao's conviction and sentencing come just weeks after the blockbuster FTX case, which saw founder Sam Bankman-Fried convicted of fraud. The two cases have further highlighted the shady mystique surrounding the cryptocurrency industry and the need for stronger regulatory oversight.
Despite the legal troubles, Binance has continued to thrive, adding over 40 million new users last year and generating an estimated $10 billion in revenue for the 12 months through March 31 of this year. Bloomberg has pointed out that as Binance's success continues, Zhao may become the "richest U.S. inmate ever" during his time behind bars.
Attorney General Merrick Garland, at the time of Zhao's conviction in November, emphasized that using new technology to break the law does not make one a "disrupter" but instead "makes you a criminal." The allegations against Binance differed significantly from those leveled against FTX, as Binance's case focused on money laundering violations rather than defrauding customers and the company.
Zhao's decision to step down as CEO and "keep his mouth shut" after admitting guilt, along with filling the leadership team with family and friends who continued to run the company as he had, has been credited with reassuring users and preventing a mass exodus of funds from Binance. This stability has allowed the company to maintain its market share and continue attracting new users.
