US DOJ seeking three-year sentence for Binance Founder Zhao 

credit: Shutterstock
credit: Shutterstock

The US Department of Justice (DOJ) has recommended a prison sentence of up to three years for Binance Founder and ex-CEO Changpeng Zhao

A sentencing memo was filed by the DOJ to the US States District Court of Washington in Seattle, detailing that the federal agency is seeking a 36 month sentence after Zhao was found to have broken US money laundering regulations and the US Bank Secrecy Act as the head of Binance at the time. 

The DOJ found Binance to have broken AML and KYC guidelines last November. This resulted in a record $4.3bn settlement which saw Zhao step down as Binance CEO and be replaced by his successor Richard Teng. Zhao was also initially handed a $50m fine.

“Zhao’s willful violation of US law was no accident or oversight. He made a business decision that violating US law was the best way to attract users, build his company, and line his pockets,” stated the DOJ in its sentencing memo. 

“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 law.”

Much of the charges stem from Binance not having suitable and/or correct compliance, AML and KYC procedures in place, with the DOJ acknowledging that Zhao oversaw a “willful violation of US law”, which they deem as “no accident or oversight”. 

Binance is still currently the largest cryptocurrency exchange in the world through transaction volume. Zhao’s leadership helped the platform grow in stature, albeit not officially regulating the company within US financial laws. 

The DOJ statement continued: “Zhao’s strategy worked. Binance – operating on a Wild West model that, as one compliance employee said, told criminals ‘come to Binance we got cake for you’ – quickly became the colossus of crypto exchanges. 

“As a result, Zhao is one of the richest people in the world and a celebrity in the crypto industry. Zhao bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime.

“But Zhao was caught, and now the Court will decide what price Zhao should pay for his crimes. The sentence in this case will not just send a message to Zhao but also to the world.”

Due to Zhao turning himself in promptly following the Binance charge in November, he was looking at a potential prison sentence originally of 18 months. However, this has since changed to 36 months due to the DOJ citing the “scope and ramifications” of Zhao’s misconduct as “massive”. 

A sentence date was scheduled for February but has been pushed back due to Zhao’s defence insisting on being allowed to travel back to his residency in the UAE. Despite two attempts, the Washington Court ruled in favour of the DOJ deeming Zhao a flight risk. 

The new sentencing date is now expected to be held at the federal court in Washington on 30 April.