Binance’s Changpeng Zhao Sentenced To Four Months In Prison

Changpeng Zhao, the founder and former CEO of Binance, the world’s largest cryptocurrency exchange, has this week discovered his fate in a US courtroom.

The Associated Press reported that Changpeng Zhao was sentenced on Tuesday to four months in prison for looking the other way as criminals used his platform to move money connected to child sex abuse, drug trafficking and terrorism.

The sentencing comes after Binance Holdings in November 2023 had reached a $4.3 billion (£3bn) settlement with the US Justice Department (DoJ) to resolve its years-long criminal investigation into the crypto exchange.

Guilty plea

In addition to the huge fine, Zhao had pleaded guilty for failing to maintain an effective anti-money laundering (AML) program and had resigned his CEO role at the exchange.

Binance had been accused by US authorities of failing to report more than 100,000 suspicious transactions, including with organisations the US described as terrorist groups, such as Hamas, and the exchange allegedly never reported transactions with websites dedicated to selling child sexual abuse materials.

As part of the settlement agreement, Zhao had been allowed to keep his vast fortune (he is worth $10.2bn) and his shareholding in Binance, the exchange he founded in 2017.

Zhao was born in China but is a Canadian and UAE citizen who resides in the United Arab Emirates.

Since November Zhao has been in the United States after being refused permission to visit his family in the UAE.

Prison sentence

Now according to the Associated Press, US District Judge Richard A. Jones on Tuesday credited Zhao for taking responsibility for his wrongdoing.

“I failed here,” Zhao reportedly told the court Tuesday. “I deeply regret my failure, and I am sorry.”

AP noted that the judge said he was troubled by Zhao’s decision to ignore US banking requirements that would have slowed the company’s explosive growth. “Better to ask for forgiveness than permission,” is what Zhao told his employees about the company’s approach to US law, prosecutors said.

“No person – regardless of wealth – is immune from prosecution or above the laws of the United States,” judge Jones reportedly said.

The sentence, which included a previously agreed-to $50 million fine, was far less than the three years the Justice Department had sought.

Zhao’s defence team has been seeking no prison time.

The Associated Press reported that Zhao is the first person ever sentenced to prison time for such violations of the Bank Secrecy Act, which requires US financial institutions to know who their customers are, to monitor transactions and to file reports of suspicious activity.

Prosecutors reportedly said no one had ever violated the regulations to the extent Zhao did. If he did not receive time in custody for the offense, no one would, rendering the law toothless, they had argued.

“This wasn’t a mistake,” Justice Department lawyer Kevin Mosley told judge Jones. “When Mr. Zhao violated the BSA he was well aware of the requirements.”

For example, Mosley said, Zhao directed the company to disguise customers’ locations in the US in an effort to avoid having to comply with US law.

Nigerian case

Last month Nigeria sought to try Binance and two of its executives on money laundering and tax evasion charges.

However one of two Binance executives detained in Nigeria escaped custody.

British-Kenyan dual national Nadeem Anjarwalla had been arrested in February along with US colleague Tigran Gambaryan, after the two were invited to Nigerian capital Abuja to attend meetings with government officials.

Nadeem Anjarwalla, Binance’s Africa regional manager, had reportedly asked guards at the guest house where he was being held to allow him to go to a mosque and he never returned.