The U.S. Department of Justice (DOJ) has proposed that Changpeng “CZ” Zhao, the founder and former chief executive of Binance, should serve a three-year prison term for his involvement in facilitating the crypto exchange’s breaches of federal sanctions and money laundering laws. This recommendation comes in the wake of Zhao’s guilty plea last year, a report by Reuters said.
According to documents filed by the DOJ, Zhao’s legal team argued against any jail time, highlighting the hefty fine he paid and his acknowledgment of responsibility. However, the DOJ countered, pushing for a 36-month incarceration period along with a $50 million fine, following Zhao’s admission of violating the Bank Secrecy Act in November.
The DOJ emphasized the significance of the sentence, not only as a punitive measure for Zhao’s actions but also as a deterrent to others who might contemplate similar unlawful ventures. The filing underscored the extensive repercussions of Zhao’s misconduct, citing the exploitation of Binance’s platform by illicit actors involved in activities such as concealing cryptocurrency origins, handling ransomware proceeds, and facilitating darknet market transactions.
Zhao, who originally faced up to 18 months in prison, now confronts a potentially extended sentence, as the DOJ argues for an “upward variance” due to the magnitude of his wrongdoing. The defense, however, maintains that Zhao was not explicitly aware of specific transactions involving criminal funds on Binance and stresses his negligible involvement in such activities relative to the platform’s overall trading volume.
Despite the defense’s arguments, the DOJ asserts that Zhao’s lack of implementation of an effective Anti-Money Laundering (AML) program at Binance and his encouragement of unlawful practices warrant a stringent penalty. Furthermore, the DOJ criticizes existing sentencing guidelines for inadequately addressing misconduct of this scale and its implications for U.S. national security.
While Zhao’s sentencing was originally slated for late February, it has been postponed to April 30. Throughout this legal saga, Binance, the world’s largest cryptocurrency exchange, pleaded guilty alongside Zhao, agreeing to a substantial $4.3 billion fine and committing to report to a court-appointed monitor, whose appointment is pending.
