Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, faces sentencing Tuesday in a Seattle courtroom, where US prosecutors are asking a judge to give him a three-year prison term for allowing rampant money laundering on the platform.
Zhao pleaded guilty and stepped down as Binance CEO in
November as the company agreed to pay $4.3 billion to settle related
allegations. US officials said Zhao deliberately looked the other way as
illicit actors conducted transactions that supported child sex abuse, the
illegal drug trade, and terrorism.
“He made a business decision that violating US law was the
best way to attract users, build his company, and line his pockets,” the
Justice Department wrote in a sentencing memorandum filed last week.
Zhao’s attorneys insist he should receive no prison term at
all, citing his willingness to come from the United Arab Emirates, where he and
his family live, to the US to plead guilty, despite the UAE’s lack of an
extradition treaty with the US. No one has ever been sentenced to prison time
for similar violations of the Bank Secrecy Act, they said.
“I want to take responsibility and close this chapter in my
life,” Zhao said when he entered his guilty plea to one count of failing to
prevent money laundering. “I want to come back. Otherwise I wouldn’t be here
today.”
But prosecutors say no one has ever violated the Bank
Secrecy Act to the extent Zhao did. The three-year prison term they’re seeking
is twice the guideline range for the crime. Binance allowed more than 1.5
million virtual currency trades — totaling nearly $900 million — that violated
US sanctions, including ones involving the Palestinian terror group Hamas’s
al-Qassam Brigades, al-Qaeda, and Iran.
Zhao knew that Binance was required to institute
anti-money-laundering protocols, but instead directed the company to disguise
customers’ locations in the US in an effort to avoid complying with US law,
prosecutors said.
The cryptocurrency industry has been marred by scandals and
market meltdowns. Most recently Nigeria has sought to try Binance and two of
its executives on money laundering and tax evasion charges.
Zhao was perhaps best known as the chief rival to Sam
Bankman-Fried, the founder of the FTX, which was the second-largest crypto
exchange before it collapsed in 2022. Bankman-Fried was convicted last November
of fraud for stealing at least $10 billion from customers and investors and
sentenced to 25 years in prison.
Zhao and Bankman-Fried were originally friendly competitors in the industry, with Binance investing in FTX when Bankman-Fried launched the exchange in 2019. However, the relationship between the two deteriorated, culminating in Zhao announcing he was selling all of his cryptocurrency investments in FTX in early November 2022. FTX filed for bankruptcy a week later.