Changpeng Zhao, the founder of the world’s leading cryptocurrency exchange, received a four-month prison sentence on Tuesday after pleading guilty last year to charges related to the lack of an effective anti-money laundering program.
The sentence, delivered in a US federal court in Seattle, is significantly lighter than the three-year term prosecutors had sought.
Before the sentencing hearing, Zhao, known as CZ, expressed regret for his actions as CEO of Binance, the crypto exchange he established in 2017.
“I deeply regret the choices that led me to this point,” he wrote in a letter to the judge. “I assure you that it will not happen again.”
Last fall, Binance agreed to pay over $4 billion in fines and other penalties as part of a settlement with the federal government. The company acknowledged involvement in anti-money laundering activities, unlicensed money transmitting, and sanctions violations.
Zhao, 47, with a personal fortune of nearly $40 billion agreed to step down as CEO and pay $200 million in fines.
Following a lengthy investigation, US authorities stated in November that Binance permitted illicit activities on its platform, facilitating transactions associated with child exploitation, narcotics, and terrorist financing.
Additionally, Binance lacked procedures to detect or report transactions posing money laundering risks, and employees were aware that such lapses could attract criminals to the platform.
A Binance compliance staffer even wrote, “We need a banner ‘is washing drug money too hard these days – come to Binance, we got cake for you.'”
Zhao’s sentencing follows that of his former rival, Sam Bankman-Fried, who received a 25-year prison term for his role in a multibillion-dollar fraud through FTX, the second-largest crypto exchange, before its collapse in 2022.
These consecutive sentences highlight the Department of Justice’s tougher stance on financial crimes, especially in the crypto sphere.
While crypto enthusiasts seek to improve the industry’s image and integrate it into mainstream finance, skeptics remain wary, criticizing the DOJ for not doing enough to combat illicit activities.
“The message from the Justice Department today is that ‘crime pays,'” said Dennis Kelleher, CEO of the nonprofit Better Markets. “CZ wasn’t even charged with money laundering; his charge was merely the absence of an anti-money laundering program. That’s hardly a slap on the wrist.”
