Changpeng Zhao, also known as CZ, has been handed a 4-month prison sentence by a U.S. District Court in Seattle on Tuesday. The Binance founder pleaded guilty to anti-money money-laundering violations last year and had to step down from his role as CEO of Binance as part of a substantial $4 billion settlement between the Department of Justice and the cryptocurrency exchange he founded.
The sentence was significantly shorter than the three years requested by federal prosecutors. They argued that Binance had deliberately turned a blind eye to illegal activity on its platform, facilitating transactions that supported child sexual abuse, drug trafficking, and terrorism financing. The Department of Justice (DOJ) presented evidence suggesting that Binance lacked basic KYC (Know Your Customer) procedures and allowed users to conduct large transactions anonymously.
The defence had requested five months of probation without any prison term, while the sentencing guidelines indicated a prison term of 12 to 18 months.
However, Judge Jones expressed skepticism of the DOJ’s claims, stating, “There’s no evidence that the defendant was ever informed” of the alleged illegal activities. He acknowledged Zhao’s willingness to cooperate with authorities and his efforts to improve Binance’s compliance measures before resigning as CEO.
The crypto community reacted with mixed emotions to the news. Some saw the sentence as a slap on the wrist, arguing that it did not adequately punish Binance for its role in facilitating illegal activity. Others viewed it as a positive development, suggesting that it would encourage stricter regulations and compliance within the cryptocurrency industry.
“This case sends a clear message that cryptocurrency exchanges are not above the law,” said a spokesperson for the DOJ. “We will continue to hold these companies accountable for their actions and ensure that they operate in a safe and legal manner.”
Binance, through its legal team, released a statement expressing its commitment to building a robust AML program and cooperating with regulators to combat financial crime.
Zhao received a much lighter sentence compared to his former crypto rival, Sam Bankman-Fried, the founder and former CEO of FTX.
Bankman-Fried was handed a 25-year prison sentence for offences related to the operation of his crypto exchange. In contrast to Zhao and the charges leveled against Binance, Bankman-Fried’s now-defunct exchange faced accusations of fraud and misappropriation of customer funds.
While Changpeng Zhao faces his prison sentence, the legal troubles for Binance are far from over. In Nigeria, two Binance executives, Nadeem Anjarwalla (regional manager for Africa) and Tigran Gambaryan (US citizen overseeing financial crime compliance), remain embroiled in a complex legal battle.
Detained in February 2024 on suspicion of tax evasion and money laundering, Anjarwalla reportedly escaped custody last month using a smuggled passport. Gambaryan remains incarcerated. The Nigerian government has also levied a four-count tax evasion charge against Binance itself.
