Binance crypto founder Zhao sentenced to four months in prison

Binance employed “Wild West” model that welcomed criminals, and did not report over 100,000 suspicious transactions with terrorist groups including Hamas, al-Qaeda and Islamic State

Changpeng Zhao
Changpeng Zhao

Changpeng Zhao, the former CEO of Binance, was sentenced in the United States to four months in prison after pleading guilty to violating U.S. laws against money laundering at the world’s largest cryptocurrency exchange.

Once considered the most powerful crypto industry figure, Zhao, known as “CZ” was at some point the poster-boy for the Maltese government’s attempt at courting the world’s crypto exchanges to the island.

‘Blockchain Island’ however never caught on, with the MFSA refusing to licence many of the crypto and VFA hopefuls wanting to set up shop in Malta.

Zhao’s sentence was significantly shorter than the three years sought by prosecutors, and below the maximum 1.5 years recommended under federal guidelines.

Binance founder pleads guilty to anti-money laundering violations, steps down

Zhao, a 47-year-old billionaire who had been living beyond U.S. reach in the United Arab Emirates, only kept a nominal office in Malta. When Binance announced it would be heading to Malta in March 2018, former prime minister Joseph Muscat was quick to welcome the exchange and touted Malta to become “the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world-class fintech companies”.

Binance never received a license to operate in Malta when regulations were introduced.

Before handing down the sentence, Judge Richard Jones faulted Zhao for making Binance’s growth and profitability a higher priority than complying with U.S. laws. “You had the wherewithal, the finance capabilities, and the people power to make sure that every single regulation had to be complied with, and so you failed at that opportunity,” he said.

Prosecutors said Binance employed a “Wild West” model that welcomed criminals, and did not report more than 100,000 suspicious transactions with designated terrorist groups including Hamas, al-Qaeda and Islamic State.

They also said Zhao’s exchange supported the sale of child sexual abuse materials and received a large portion of ransomware proceeds.

Binance agreed to a $4.32 billion penalty, and Zhao paid a $50 million criminal fine plus $50 million to the U.S. Commodity Futures Trading Commission.

“I’m sorry,” Zhao told the judge before being sentenced. “I believe the first step of taking responsibility is to fully recognize the mistakes. Here I failed to implement an adequate anti-money laundering programme ... I realise now the seriousness of that mistake.”

Zhao will surrender voluntarily to serve his sentence, most likely at a detention centre near Seattle-Tacoma International Airport.

Zhao stepped down as Binance’s chief in November, when he and the exchange he founded in 2017 admitted to evading money-laundering requirements under the Bank Secrecy Act.