On Tuesday, April 30th, the founder of the world’s largest cryptocurrency exchange Binance, Zhao Changpeng, was sentenced to four months in prison for money laundering.
Zhao Changpeng pleaded guilty to the U.S. Department of Justice in December 2023, admitting to money laundering charges and paying a $50 million fine. Additionally, Binance was hit with a hefty $4.3 billion fine and required to appoint an independent monitor to oversee its compliance.
The 47-year-old Zhao Changpeng received his sentence from District Judge Richard Jones in Seattle on Tuesday. The sentence handed down by the judge was significantly lower than the prosecution’s request for a 3-year prison term for Zhao Changpeng.
Among the prominent figures in the cryptocurrency industry, Zhao Changpeng becomes the second person to be imprisoned. The founder of the now defunct cryptocurrency exchange FTX, Sam Bankman-Fried, was previously sentenced to 25 years for wire fraud and conspiracy to commit fraud.
Judge Jones emphasized that he hopes Zhao Changpeng understands that no one, regardless of wealth, power, or status, is above being prosecuted or above U.S. law.
Zhao Changpeng’s defense attorney requested the judge not to send his client to prison and cited similar banking violations that resulted in probation.
The sentencing on Tuesday marks the conclusion of the long-running investigation by the U.S. Department of Justice into Binance.
Prior to the sentencing, Zhao Changpeng spoke in court, stating that he chose to come to Seattle to face the charges instead of staying in his family home in the UAE, where there is no extradition treaty with the U.S.
“I left my family to come to the U.S., and I take responsibility for my actions,” Zhao Changpeng said. “Because accountability is a core value of mine, and I am striving to live by it.”
Over 160 friends, colleagues, and investors submitted letters in support of Zhao Changpeng.
Federal prosecutor Kevin Mosley stated that Zhao Changpeng intentionally violated U.S. laws, not out of negligence.
Mosley clarified that authorities are not equating Zhao Changpeng’s offenses with those of FTX’s Bankman-Fried nor trying to “stifle the cryptocurrency industry.”
Unlike Bankman-Fried, Zhao was not accused of embezzling client funds.
Zhao Changpeng immigrated from China to Canada at the age of 12 and admitted that Binance failed to implement proper anti-money laundering measures.
The lack of anti-money laundering measures led to illicit activities on the Binance platform, including transactions of Bitcoin involving criminals, hackers, and terrorist organizations such as Al-Qaeda and ISIS.
In one detailed example provided by the Financial Crimes Enforcement Network (FinCEN), the military wing of Hamas, the Al-Qassam Brigades, utilized Bitcoin transactions to raise funds for the Palestinian resistance movement. Hamas was designated as a terrorist organization by the U.S. after killing over 1,200 Israelis on October 7, 2023.
Prosecutors highlighted that Binance operated under a “wild west” model, making it a cryptocurrency exchange giant. Despite Zhao Changpeng launching the U.S. branch Binance.US in 2019, he left a loophole for large traders to continue using the international platform.
Due to inadequate compliance, some Binance customers engaged in transactions with Iranian residents, violating U.S. sanction regulations. According to a government memorandum, between 2018 and 2022, Binance processed at least 1.1 million transactions in violation of U.S. sanctions, totaling approximately $898 million.
In the sentencing memorandum, Zhao Changpeng’s lawyers stated that the government did not allege that Zhao knew the funds circulating through Binance were proceeds of crime. However, other employees of Binance acknowledged that terrorists and clients from sanctioned countries like Russia used the platform.
Despite the widespread attention to Zhao Changpeng’s criminal case, it has not affected his personal wealth. With the cryptocurrency industry’s recovery in 2023, his fortune surged by $25 billion, ranking him 38th among the world’s billionaires according to the Bloomberg Billionaires Index.