Federal prosecutors want former Binance CEO Changpeng Zhao to spend three years in prison.
The one-time head of the world’s largest cryptocurrency platform deserves this sentence, the Department of Justice said Tuesday (April 23), because he willfully violated U.S. laws governing crypto to further Binance’s growth.
“Zhao and Binance specifically targeted U.S. users as part of Binance’s growth strategy, knew that this choice subjected Binance to U.S. laws, but for years deliberately ran the company in violation of U.S. law,” prosecutors wrote in a sentencing memorandum.
“As Zhao admitted, breaking U.S. law was critical to the company’s success and profitability. Zhao bragged that if Binance complied with U.S. law, it would not be ‘as big as we are today’ and ‘would also not have had any US revenue we had for the last 2 years.’”
The 36-month request would double the 18-month term Zhao had been expected to serve, assuming the judge hands down a custodial sentencing at a hearing scheduled for next week. Zhao pleaded guilty last year for failing to establish proper money laundering controls at Binance, in violation of the Bank Secrecy Act (BSA).
That failure, the memorandum said, allowed “illicit actors” to use Binance to move proceeds from scams, hacks, and ransomware attacks.
Zhao’s attorneys have filed their own response to the memorandum, noting that their client has already paid “massive fines,” and directed Binance to plead guilty last year before stepping down. They add that he regrets his offense and has shown a willingness to make amends.
“No defendant in a remotely similar BSA case has ever been sentenced to incarceration,” the defense said. “Mr. Zhao should not be the first.”
Zhao stepped down as CEO last November as Binance agreed to pay a record $4.3 billion fine to the U.S. government. The plea resolved the company’s issues with the Department of Justice, as well as the Commodity Futures Trading Commission (CFTC), Office of Foreign Assets Control and Financial Crimes Enforcement Network.
Earlier this month, Zhao’s successor, Richard Teng, acknowledged the company’s mistakes in an interview with CNBC.
“In those very early stages of development … Binance was operating in a certain fashion,” Teng said. “But we have moved past that. As the company moves into greater maturity, we are looking at sustainability. The direction of travel now is very clear toward much more compliance, which is why we’re building up a very robust compliance program.”
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