Binance founder Changpeng Zhao at Web Summit 2022. Image: Stephen McCarthy/Web Summit via Sportsfile via Flickr (CC BY 2.0)
US prosecutors claim Zhao’s ‘willful violation’ of US law deserved at least a three year prison sentence, while the Binance founder said he will remain a passive crypto investor.
Binance founder and former CEO Changpeng Zhao has been sentenced to four months in prison in the US for failing to establish adequate anti-money laundering (AML) protections.
Prosecutors claim Zhao led Binance to become the world’s largest cryptocurrency exchange by “exploiting the US market while defying US law”. They also claim that – because Zhao failed to establish an effective AML programme – criminals “flocked to the exchange”.
The decision follows a settlement last November, when Binance agreed to pay more than $4bn to resolve a US investigation. The US justice department claimed the company admitted to engaging in unlicenced money transmitting and sanctions violations. Binance responded at the time and said its resolutions do not allege that it misappropriated any user funds or that it engaged in market manipulation.
During this time, Zhao pleaded guilty to failing to maintain an effective anti-money laundering programme and resigned as CEO.
“Zhao’s wilful violation of US law was no accident or oversight,” US prosecutors said in their sentencing memo. “He made a business decision that violating US law was the best way to attract users, build his company and line his pockets.”
“Despite knowing Binance was required to comply with US law, Zhao chose not to register the company with US regulators; he chose not to comply with fundamental US AML requirements; he chose not to implement and maintain an effective know-your-customer system, which prevented effective transaction monitoring and allowed suspicious and criminal users to transact through Binance.”
Zhao was sentenced to four months, but in the memo, prosecutors claim any sentence of less than three years “would fail to reflect the gravity of his offense”. Zhao thanked people for their “care and support” on X.
“I will do my time, conclude this phase and focus on the next chapter of my life (education),” Zhao said. “I will remain a passive investor (and holder) in crypto. Our industry has entered a new phase. Compliance is super important.”
Meanwhile, a report from The New York Times claims Zhao is already planning his comeback and was spotted speaking with OpenAI CEO Sam Altman.
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Binance founder Changpeng Zhao at Web Summit 2022. Image: Stephen McCarthy/Web Summit via Sportsfile via Flickr (CC BY 2.0)
