Binance founder Changpeng Zhao has been sentenced to four months in prison for breaking US anti-money laundering laws.
Technology
Binance founder’s sentencing hearing
Changpeng Zhao pleaded guilty to money laundering charges. Prosecutors have requested three years of prison time.
Prosecutors requested three years of prison time, double the sentencing guideline of 18 months, because the “scope and ramifications of Zhao’s misconduct were massive,†they wrote in their sentencing memo. Zhao’s lawyers, in their own sentencing memo, said that Zhao deserved no jail time, as “no defendant in a remotely similar BSA [Bank Secrecy Act] case has ever been sentenced to incarceration.â€
Zhao pleaded guilty and stepped down from Binance as part of a settlement with the US Department of Justice in November. Additionally, Binance agreed to pay $4.3 billion in fines. As part of the agreement, Zhao has waived the right to appeal any sentence up to 18 months in prison. He also agreed to pay a fine of $50 million, a drop in the bucket compared to his estimated $33 billion fortune.
According to the US government, Binance knowingly evaded anti-money laundering regulations. As a result, Iranian, Cuban, and Syrian customers were able to transact in violation of US sanctions. Settlements with the CFTC and SEC were announced at the same time as Zhao’s guilty plea.
I’m here in Seattle for the hearing, follow along with all of my updates below.
Highlights
May 1
Elizabeth Lopatto
I have some questions about what Changpeng Zhao gave to the feds
Illustration by Cath Virginia / The Verge | Photos from Getty Images
There are a lot of differences between Changpeng Zhao and Sam Bankman-Fried, and now we can add one more to the list: the amount of time they’ll serve for their crimes. Bankman-Fried got 25 years; Zhao got four months.
There’s more. Zhao appeared in court in a tailored navy suit with a light blue tie when he spoke in his own defense. Bankman-Fried was shackled and in prison garb.
Apr 30
Elizabeth Lopatto
Zhao will leave the courtroom now.
The rest of us are asked to remain sitting while he leaves. Unclear if there will be a press conference after.
Apr 30
Elizabeth Lopatto
And we’re back!
The defense is requesting that Zhao be designated to SeaTac, at a date to be specified by the court. Zhao promises before the court that he will show up at the time, which is not yet decided.
Apr 30
Elizabeth Lopatto
Zhao won’t be remanded immediately into custody.
We are taking a 10 minute break, but there are a few more matters to be ironed out.
Apr 30
Elizabeth Lopatto
Binance founder Changpeng Zhao sentenced to four months in prison
Cath Virginia / The Verge | Photos from Getty Images
Binance founder Changpeng Zhao was sentenced to four months in prison for failing to establish adequate anti-money laundering protections. Zhao, once the head of the largest crypto exchange in the world, pleaded guilty in November 2023.
Judge Richard Jones says that Zhao prioritized “Binance’s growth and profits over compliance with US laws and regulations.†While Jones doesn’t think Zhao is likely to reoffend, the scale of the crime is notable.
Apr 30
Elizabeth Lopatto
“I was deeply troubled... by your statement reflected on pg. 1, the opening line of the government’s brief to this court that it was better to ask for forgiveness than permission.â€
But Jones isn’t going to take the government’s sentencing recommendation. He hasn’t yet announced the exact sentence.
Apr 30
Elizabeth Lopatto
CZ is clearly on pins and needles as Jones speaks.
He’s leaning forward, listening intently, and occasionally nodding.
Apr 30
Elizabeth Lopatto
Jones doesn’t think Zhao is likely to reoffend.
However, the scale of the offense is remarkable, and Jones wants to consider deterring future crime. The letters sent to the court on Zhao’s behalf will play a significant role in the sentencing.
Apr 30
Elizabeth Lopatto
“Everything I see about your history and characteristics are of a mitigating nature and a positive nature,†says Judge Richard Jones.
The court recognizes that he came voluntarily to the US, has not previously broken laws, and that he took “extraordinary steps and significant steps†in cooperation with law enforcement. But the nature of the events was “aggravating.â€
Apr 30
Elizabeth Lopatto
Zhao is soft-spoken but very clear.
After his brief remarks, he has now stepped down.
Apr 30
Elizabeth Lopatto
“I’ve had a lot of quiet time alone to think and reflect.â€
Zhao says he wants to create a platform for online education for underprivileged kids. “I find this new work extremely rewarding and meaningful.â€
Apr 30
Elizabeth Lopatto
Changpeng Zhao speaks.
Addressing the courtoom before being sentenced, the Binance begins by saying, “I’m sorry,†and says he wants to take responsibility for his “mistakes.†He notes that Binance did implement a KYC/AML program, and that it is cooperating with the US government.
“In my mind, I wanted to do everything possible before stepping down as CEO.â€
Apr 30
Elizabeth Lopatto
Someone took a photo and posted it on Twitter during the hearing.
The judge is annoyed by this.
Apr 30
Elizabeth Lopatto
And we’re back!
Judge Richard Jones is back on the bench, and we are about to hear from Changpeng Zhao himself.
Gotta say, the government has not exactly covered itself in glory here. If Zhao’s statement is convincing, he might not serve time at all.
Apr 30
Elizabeth Lopatto
We are taking a recess.
Zhao will speak when we return.
Apr 30
Elizabeth Lopatto
Because Zhao is a non-citizen, he’s ineligible for a minimum security facility, Burck notes.
And because he’s so well-known as a wealthy man, and because Binance is cooperating with the government, there’s a real risk in being in certain facilities, Burck says.
Apr 30
Elizabeth Lopatto
We are now discussing “general deterrence.â€
Will the sentence deter other people? Government said Zhao should be punished or else there will be a perverse incentive to do what Zhao did. Burck is arguing that prison time will tell people not to come to the US and accept responsibility for their crimes.
Apr 30
Elizabeth Lopatto
One thing I’ve been wondering...
If the government wanted to put Zhao in jail for serious time, why did they let him plead to something with such a short sentence? It makes me wonder about the matter under seal we keep hearing about.
Apr 30
Elizabeth Lopatto
“This is unprecedented in terms of volume, scale and massiveness in dollar impact of noncompliance,†says Judge Richard Jones.
He and Burck are having a back-and-forth now about the appropriateness of jail time as recommended by the probation department.
Apr 30
Elizabeth Lopatto
I do find it curious that defense lawyers keep referring to “a mistake.â€
We know from CZ’s messages quoted in multiple court cases that avoiding anti-money laundering controls was not exactly a mistake but a strategy. The language cuts against the idea that CZ is taking “full responsibility†for his misconduct...
Apr 30
Elizabeth Lopatto
Second reference to “matters that are under seal.â€
👀
Apr 30
Elizabeth Lopatto
Burck is by far a better speaker than Bartlett.
He’s making a strong case that the government’s request for three years is way out of line. CZ looks less unhappy listening to his lawyers speak; he’s listening intently, with his eyebrows up.
Apr 30
Elizabeth Lopatto
A second defense lawyer, William Burck, is now speaking on CZ’s behalf.
“When we read the government’s submission... it read to us like the kind of submission a desperate defendant would write†because it says, essentially, to ignore the sentencing guidelines.
Apr 30
Elizabeth Lopatto
There is some secret “compelling factor†the court should consider, says CZ’s lawyer.
Some of the filings have been sealed. Wonder what this is!!
Apr 30
Elizabeth Lopatto
“He never minimized his conduct,†says Mark Bartlett, CZ’s lawyer.
He “admitted his mistake,†Bartlett says, and asks whether there is anything else CZ could possibly have done to show remorse. Bartlett says he can’t think of anything else.