The founder and former CEO of Binance, the world’s largest cryptocurrency exchange, has been sentenced to prison for failing to implement anti-money laundering measures, looking away from transactions that supported child sex abuse, illegal drug trade and terrorism.
In a historic decision, Changpeng Zhao, known as “CZ,” was handed a four-month federal prison sentence on Tuesday for violating the Bank Secrecy Act. Zhao had pleaded guilty last November to failing to establish an adequate anti-money laundering program at Binance, enabling the platform to facilitate transactions linked to criminal activities such as child exploitation, drug trafficking, and terrorism financing.
The sentencing, delivered by U.S. District Judge Richard Jones in Seattle, concluded a high-profile case that exposed alarming compliance deficiencies at Binance under Zhao’s leadership. Judge Jones condemned the “unprecedented” scale of Binance’s violations, accusing the company of “essentially turning a blind eye” to illicit financial flows.
“You prioritized Binance’s growth and profits over compliance with United States laws and regulations,” Judge Jones reprimanded Zhao sternly. “You have to understand that despite wealth, power, or status, no person, regardless of wealth, is immune from prosecution or above the laws of the United States.”
Prosecutors argued that Zhao’s willful disregard for establishing basic financial crime prevention protocols, such as identity verification and transaction monitoring, created a haven for money laundering activities.
The four-month sentence was less severe than the three-year term prosecutors had sought but more stringent than the probation Zhao’s defense team requested. Prosecutors argued that Zhao’s willful disregard for establishing basic financial crime prevention protocols, such as identity verification and transaction monitoring, created a haven for money laundering activities.
Zhao, the 46-year-old former CEO, expressed remorse during the hearing. “I failed here, I deeply regret my failure, and I’m sorry,” he told the court. However, Judge Jones remained unmoved by Zhao’s backstory, underscoring the grievous nature of Binance’s violations, which enabled “money to flow to terrorists, cybercriminals, and child abusers through its platform,” as stated by U.S. Treasury Secretary Janet Yellen.
The sentencing represented the culmination of a sprawling investigation into Binance that began in 2020. Last year, Binance owner pleaded guilty to three felony counts and agreed to pay $4.3 billion in fines, one of the largest criminal settlements in history. Prosecutors accused the exchange of willfully failing to register with the Financial Crimes Enforcement Network (FinCEN) and deliberately bypassing compliance processes to gain market share rapidly.
The ruling against Zhao and Binance comes amid heightened scrutiny of the cryptocurrency industry by U.S. regulators. The case demonstrates authorities’ intensifying efforts to bring accountability and oversight to the largely unregulated realm of digital assets, which has been plagued by fraud and illicit finance scandals, exemplified by the dramatic collapse of FTX and the subsequent arrest of its founder Sam Bankman-Fried.
As the crypto sector continues its dizzying evolution, market participants and regulators alike will closely monitor the repercussions of this landmark case. The ruling sets a precedent for stringent enforcement of anti-money laundering laws, potentially ushering in a new era of heightened compliance standards for digital asset platforms.
