Changpeng Zhao, the founder of Binance, the world’s leading cryptocurrency exchange, was sentenced to four months in prison after pleading guilty to money-laundering charges. The sentence was far lighter than the three years prosecutors had argued for. Zhao, also known as CZ, apologized for his mistakes as CEO of Binance in a letter to the judge and expressed deep regret for his choices. Binance agreed to pay more than $4 billion in fines and other penalties as part of a settlement with the federal government last fall. The company admitted to engaging in anti-money laundering activities, unlicensed money transmitting, and sanctions violations.
Despite his personal fortune of nearly $40 billion, Zhao agreed to step down as CEO and pay $200 million in fines. US authorities found that Binance allowed bad actors on the platform to engage in transactions linked to illegal activities such as child sex abuse, narcotics, and terrorist financing. The lack of protocols to flag or report transactions for money-laundering risks and employees’ awareness of this issue invited criminals to the platform. This resulted in a damaging reputation for the world’s largest crypto exchange.
Zhao’s sentencing comes shortly after his former rival, Sam Bankman-Fried, was sentenced to 25 years in federal prison for his role in a multibillion-dollar fraud through FTX, the second largest crypto exchange before its sudden collapse in 2022. These consecutive sentences highlight the Department of Justice’s tougher stance against financial crimes, especially within the crypto industry. Despite efforts by crypto investors and businesses to pivot towards the mainstream, skeptics still view the industry with suspicion and criticize the DOJ for not doing enough to combat it.
Critics like Dennis Kelleher, CEO of Better Markets, argue that the Justice Department’s leniency towards Zhao sends the message that “crime pays.” Kelleher points out that CZ was only charged with not having an anti-money laundering program, rather than money laundering itself, which he considers less than a slap on the wrist. The industry as a whole faces challenges in overcoming its association with criminal activities and gaining wider acceptance in the mainstream financial system. The DOJ’s actions and the severity of sentences for industry leaders reflect a broader effort to address financial crimes and illicit activities in the crypto space.
