The Founder of Binance Changpeng Zhao has been sentenced to four months in prison after a court hearing in Seattle yesterday.
Zhao was charged last November for his role in Binance breaking the Bank Secrecy Act after failing AML and KYC procedures, ultimately stepping down as CEO, resulting in a $4.3bn settlement with the US law enforcement agencies.
Despite now facing four months inside a US federal prison, the length of the sentence is significantly shorter than the US Department of Justice’s (DOJ) 36-month recommendation.
Judge Richard Jones informed the Seattle courtroom there was “no evidence that the defendant was ever informed” of illegal activity within Binance before dismissing the lengthier proposal.
Jones said: “The court finds the defendant has accepted responsibility. “Everything I see about you and your characteristics are of a mitigating nature.”
Upon the news of the charges against Binance in November, Zhao flew to Seattle to turn himself in and admit guilt to breaking the Bank Secrecy Act. He was eventually released on a $175m bond.
Typical prison sentences for violating the Bank Secrecy Act result in 10-year imprisonment. However, due to his guilty plea and cooperation with the investigation, Zhao was able to significantly reduce this.
The US DOJ weeks leading up to the sentence date was lobbying for up to a three-year sentence as a message that not even the most powerful of crypto figures can fly under regulatory oversight.
The DOJ court filed last week read: “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.”
Zhao becomes the latest cryptocurrency CEO who has been sent to prison over failing US financial regulations. Sam Bankman-Fried, more notoriously, was sentenced for 25 years after he was found guilty on all fraud and wire fraud charges in October.
Whilst Zhao’s charges and subsequent sentence is not near as severe as Bankman-Fried’s, it raises questions again surrounding confidence within the crypto sector after seemingly being able to break into the mainstream following the approval of Bitcoin ETFs in not just the US, but in other countries soon to follow.
