Binance founder Changpeng ‘CZ’ Zhao sentenced to 4 months, will enter prison as country’s richest inmate (2024)

After two years marked by the stunning collapse of crypto companies including Sam Bankman-Fried’s FTX, the Justice Department brought criminal charges against Binance and its CEO in November, though the exchange remained operational. Unlike the DOJ’s case against Bankman-Fried, or other alleged crypto criminals such as Terraform Labs’ Do Kwon, Zhao and Binance reached a settlement with prosecutors, along with a slew federal agencies including the Treasury Department and Commodity Futures Trading Commission.

Zhao’s sentencing marks the conclusion of the process, with Judge Richard Jones ruling that the crypto entrepreneur—estimated to be worth around $43 billion, making him the richest inmate to serve time in the U.S.—must pay a $50 million personal fine in addition to his time behind bars.

In court, Zhao expressed contrition for his “mistakes” as CEO, though he noted that Binance implemented a compliance program. “In my mind, I wanted to do everything possible before stepping down as CEO,” he said before Jones.

The judge argued that Zhao’s “better to ask forgiveness than permission” philosophy was troubling, but ultimately decided on a lesser sentence than the 36 months requested by prosecutors. “Everything I see about your history and characteristics are of a mitigating nature and a positive nature,” Jones said, citing Zhao’s dedication to Binance and low likelihood to re-offend.

The rise and fall of a crypto tycoon

Zhao founded Binance in 2017, and it became the largest crypto exchange in just six months. Amid its meteoric growth, however, Binance struggled to implement effective “know your customer” and anti–money-laundering regimes—an embarrassing reality laid bare in complaints filed by the CFTC and Securities and Exchange Commission in 2023, including internal messages revealing that executives were aware of widespread compliance violations.

Despite—or perhaps owing to—Binance’s wildcat approach, Zhao became a global icon for the crypto industry, appearing at conferences from Portugal to the United Arab Emirates, which he made his de facto headquarters. Still, as U.S. authorities circled around the world’s leading crypto companies, reports emerged that the DOJ was building a case against Binance.

The first shots fired came in March and June of 2023 in twin lawsuits by the CFTC and SEC, with the agencies alleging a raft of law-breaking behavior. SEC Chair Gary Gensler accused Binance of an “extensive web of deception,” including charges of fraud that echoed the illegal misappropriation of customer funds at FTX. Exacerbated by a broader downturn in crypto markets, Binance’s once-ironclad grip atop the industry seemed to falter, with its U.S. arm struggling especially.

In November, Attorney General Merrick Garland announced that the DOJ, along with the CFTC and Treasury Department, had reached a settlement with Binance and Zhao on charges related to money-laundering violations at the exchange. The company agreed to pay $4.3 billion in fines spread among the agencies, which represented the largest enforcement action in Treasury Department history.

Notably, the settlement did not include fraud charges, and the SEC did not participate in the joint action. The agency continues to litigate its case against Binance in the U.S. District Court for the District of Columbia, where a judge recently held a hearing on Binance’s motion to dismiss the lawsuit.

The lack of more serious charges, along with the relatively light slap on the wrist for Zhao, led watchdog groups such as Better Markets to argue the settlement represented a “miscarriage of justice.”

“The punishment imposed simply does not fit the crime,” Better Markets president and CEO Dennis Kelleher said in a statement shared with Fortune. “In fact, the settlement is pathetic compared to the crime wave and the wealth accumulated from that criminal conduct.”

An uncertain future

While Zhao’s plea deal laid out a potential sentence of 18 months in prison, prosecutors filed a memo last week requesting he serve 36 months, citing the “magnitude of Zhao’s willful violation of U.S. law and its consequences” and arguing that it would “not just send a message to Zhao but also to the world.”

In a concurrent filing, Zhao’s lawyers wrote that he “deeply regrets his offense” and asked for no time in prison, suggesting instead he be sentenced to house arrest. The request included letters from more than 160 friends and business associates, including members of the ruling families in the UAE and former U.S. ambassador to China Max Baucus, a former U.S. senator who serves on Binance’s advisory board.

Ultimately, Jones sided in part with Zhao’s team during Tuesday’s hearing, arguing against the prosecution’s proposed extended sentence given the lack of evidence that Zhao knew of illegal activity.

With Zhao stepping down as Binance CEO as part of his sentencing agreement, his exchange’s future looked shaky as its market share tumbled toward the end of 2023. Under new CEO Richard Teng, a former regulator in the UAE and Singapore, the crypto giant has regained its dominance as crypto markets boomed following the January approval of Bitcoin ETFs in the U.S.

The once-defiant company has also begun to refashion itself as a more traditional financial firm, including the appointment of a board of directors and working to establish an official global headquarters, as Teng told Fortune in April. Binance has also increased its compliance budget, partly dictated by its settlement, as it prepares for the appointment of federal monitors from the DOJ and Treasury Department.

“We have made considerable compliance enhancements, including substantially updating our KYC [know your customer] protocols, expanding our in-house anti–money-laundering detection and analytics capabilities, and hiring key compliance personnel with experience at the highest levels of law enforcement and traditional finance,” a company spokesperson said in a statement to Fortune after Zhao’s sentencing.

While Zhao is no longer involved in the day-to-day of Binance, he still maintains prodigious equity in the firm, which will ensure his status as one of the richest people in the world. In March, he also announced that he would launch Giggle Academy, a nonprofit education platform with blockchain-enabled mechanics. His Twitter account, once devoted to posts about the crypto industry, now shares updates on his new project’s development.

“Learning a lot,” he tweeted in late March. “Keep building!”