Former Binance CEO Changpeng Zhao is sentenced to four months in jail for money ... trends now

Former Binance CEO Changpeng Zhao was sentenced to four months in prison after pleading guilty in November 2023 to a money laundering charge.

Zhao, who went by the nickname CZ, has also satisfied the requirement of him to pay $50 million in fines, U.S. District Judge Richard Jones said in court Tuesday. The judge also won't impose five months of probation as was recommended by the probation officer.

The 47-year-old admitted to violating the Bank Secrecy Act by willfully failing to set up an effective anti-money laundering system at Binance, the cryptocurrency exchange he founded and ran as CEO from July 2017 to November 2023.

Binance also pleaded guilty to similar charges from the US Department of Justice in November 2023 and was forced to pay $4.3 billion in fines and restitution for failing to register as a money transmitting business, Forbes reported.

Zhao, a Chinese-born Canadian citizen, arrived at a federal courtroom in Seattle Tuesday, where the judge handed down the four-month sentence. Zhao's mother, son, nephew and sister were present at the hearing, according to reports.

The judge remarked that he doesn't think Zhao is likely to reoffend, adding that he read all 161 letters sent to the court asking for leniency for Zhao. The judge even complimented Zhao's 'hard work and vision,' saying the Binance founder risked his 'entire net worth' to make the company succeed.

The judge didn't just praise Zhao though. He reference a report submitted to the court that showed billions of dollars worth of bitcoin were 'directly sent' to darknet markets.

'I was deeply troubled in the materials submitted by the parties that include reference to your statement..."it was better to ask forgiveness than permission,"' the judge said.

Seattle federal prosecutors had asked for three years behind bars, while the defense was looking for five months of probation. 

During the sentencing hearing Tuesday, prosecutors argued that Zhao knew of the illegal activity going on at Binance, but judge disagreed, saying: 'There’s no evidence that the defendant was ever informed.'

Therefore, the Justice Department's push for a sentencing enhancement was denied after a back and forth between US attorneys and the judge. The judge did find that Zhao accepted responsibility for the crimes he was charged with.

Even still, one of the government attorneys said Tuesday that Zhao's efforts to break the law were 'integral' to tap the U.S. financial system. 

'If Mr. Zhao does not face incarceration after deliberately and willfully planning to violate U.S. law to build the largest crypto exchange in the world and get rich in the process…then no one will face incarceration and the [Bank Secrecy Act] will for intents and purposes be a dead letter,' the prosecutor also said prior to the sentence being handed down.

Zhao was seen frowning, raising his eyebrows and furrowing his forehead during the prosecution's opening statement, according to reports from inside the courtroom. 

When it was his turn to speak, Zhao began by saying 'I'm sorry' and that he wants to take responsibility for his 'mistakes.' He admitted he failed to set up anti-money laundering protections and 'know your customer' requirements at Binance, but has since rectified that.

'Know your customer' guidelines are required by U.S. law and are used by financial services companies to verify their customers are who they say they are, thereby cutting down on illegal activity. 

The judge said in response that everything he sees about Zhao's history and characteristics are  'of a mitigating nature and a positive nature.' 

Though, the judge also said that Zhao's failure to comply with U.S. regulations on money laundering were 'aggravating' and had an effect on drug trafficking and terrorism.

The defense countered the prosecution's desire for a longer sentence by reminding the judge that Zhao surrendered himself to authorities in November 2023 and didn't fight extradition from where he lives in Dubai. 

Zhao's attorneys added that he directed Binance to cooperate with the criminal investigation, which they said should count in his favor.

The defense did reveal that Zhao still has ownership in Binance, adding the caveat that he no longer is in control. 

Perhaps the strongest argument the defense made for leniency in Tuesday's hearing was bringing up the case of Arthur Hayes. 

Hayes founded crypto platform BitMEX and pled guilty to violating the Bank Secrecy Act - the same charge Zhao faced - and was sentenced to six months home detention, two years probation and ordered to pay a $10 million fine.

In a scathing sentencing letter last Tuesday, the Justice Department said much the same as its attorneys did in court, arguing Zhao targeted high-value customers in the U.S. by letting them do whatever they wanted on the platform. Even if it broke the law.

'Zhao's willful violation of U.S. law was no accident or oversight. He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets,' prosecutors wrote.

And line his pockets, he did. Zhao is worth a staggering $42.9 billion through his holdings in Binance and Binance.US, making him the 29th richest person in the world, according to the Bloomberg Billionaire's Index. 

It's a far cry from his burger flipping days at McDonald's in the early 1990s when he was a teenager

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