Binance Founder Changpeng Zhao Sentenced to 4 Months in Prison for Money Laundering Violations

Former Binance CEO Changpeng “CZ” Zhao was sentenced to four months in prison Tuesday, punished after pleading guilty to money laundering violations last year.

Changpeng Zhao “had the personnel, resources, and wherewithal to comply with U.S. regulations,” U.S. District Judge Richard Jones said in Seattle while delivering Zhao’s sentence. “But failed at that opportunity.”

Jones also cited a statement from Zhao that said “it was better to ask forgiveness than permission,” with the judge that he was “deeply troubled” by the sentiment. Even so, he pushed back against prosecutors’ requests for a multi-year sentence.

“Everything I see about your history and characteristics are of a mitigating nature and a positive nature,” said Jones, according to The Verge.

Zhao founded Binance in 2017, and under his leadership, the company grew into crypto’s largest exchange by trading volume—cementing Zhao’s presence as a key business figure in the nascent crypto industry. But the former CEO was forced to step down from Binance last November as part of a $4.3 billion settlement between him, the exchange, and U.S. law officials.

U.S. Justice Department officials said that Zhao created a company culture in which Binance’s growth was prioritized over compliance with U.S. financial rules. By serving American customers without the proper controls in place, funds linked to virtual theft and terrorism were able to flow through Binance undetected, officials said.

Binance agreed to exit the U.S. market entirely as part of the settlement. Additionally, Zhao agreed to personally pay a $50 million fine and to stay out of Binance operations for at least three years as he pleaded guilty to anti-money laundering violations.

Since flying to Seattle to enter that plea, Zhao has been prohibited from leaving the U.S. as travel restrictions were placed on him by Judge Jones. Federal prosecutors warned that Zhao—with an estimated wealth of $37 billion—was a flight risk.

When the U.S. Department of Justice argued last week that Zhao should be sentenced to three years in prison, its recommendation went beyond the 18 months suggested under federal sentencing guidelines. Citing Zhao’s “willful violation of U.S. law,” DoJ officials argued the harsher-than-expected sentence would “send a message […] to the world” and deter future bad actors.

Judge Jones did not agree, reportedly telling the DOJ attorneys on Tuesday that there is no evidence that the defendant was ever informed of his illegal activity. The DOJ said the court should be able to infer awareness citing a previous case, but Judge Jones responded that the case authority was not clear.

Jones agreed with the assessment of the Probation Office that said the sentence could be between 10 to 16 months in prison and one to three years of supervised release.

Any credit Zhao received for coming in is reflected in the plea agreement, the DOJ reportedly told the court, adding that the agency does not see Zhao in the same light as FTX founder Sam Bankman-Fried.

“Mr. Zhao and Binance did encourage compliance enhancements but this was after Binance got caught,” the DOJ reportedly said. “This is what you’re supposed to do. It’s commendable, but it does not merit a probation sentence,” adding that probation would incentive others to break the law.

In a filing, Zhao’s lawyers responded that probation was warranted instead of a prison, noting that incarceration has not been used as a punishment in similar cases. They cited former BitMEX CEO Arthur Hayes as an example, who was sentenced to six months of house arrest and two years’ probation after pleading guilty to violating the Bank Secrecy Act in early 2022.

“No defendant in a remotely similar BSA case has ever been sentenced to incarceration,” Zhao’s lawyers wrote. “Mr. Zhao should not be the first.”

The Probation Department recommended that Zhao receive a custodial sentence of five months, which the office said would be enough to deter defendants and other without being unnecessarily harsh. Jones ultimately opted to deliver a sentence of four months in prison.

Meanwhile, Binance faces an ongoing lawsuit brought by the Securities and Exchange Commission last year, which accuses the firm of flouting securities laws in the U.S. Last December, the firm moved to have the charges dismissed in a series of filings.

Edited by Ryan Ozawa and Andrew Hayward

Editor’s note: This story was updated with additional detail after publication.

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