Changpeng Zhao arrives at federal court in Seattle on Tuesday.
New York CNN —
Changpeng Zhao, the founder of the world’s leading cryptocurrency exchange, was sentenced on Tuesday to four months in prison after pleading guilty last year to charges that he failed to maintain an effective anti-money laundering program.
The sentence, handed down in a US federal court in Seattle, is far lighter than the three years prosecutors had argued for.
Prior to the sentencing hearing Tuesday, Zhao, who goes by CZ, apologized for mistakes he made as CEO of Binance, the crypto exchange he founded in 2017.
“Words cannot explain how deeply I regret my choices that result in me being before the Court,” he said in a letter to the judge. “Rest assured that it will never happen again.”
Binance agreed to pay more than $4 billion in fines and other penalties as part of a coordinated settlement with the federal government last fall. The company admitted to engaging in anti-money laundering activities, unlicensed money transmitting and sanctions violations.
Zhao, who is 47 and has a personal fortune of nearly $40 billion, according to Bloomberg, agreed to step down as CEO and pay $200 million in fines.
Following a multiyear investigation, US authorities in November said Binance — the world’s largest crypto exchange — allowed bad actors on the platform, enabling transactions linked to child sex abuse, narcotics and terrorist financing.
Further, Binance did not have protocols to flag or report transactions for money-laundering risks, and employees were well aware that such an oversight would invite criminals to the platform. According to court documents, one Binance compliance staffer wrote:“We need a banner ‘is washing drug money too hard these days - come to binance we got cake for you.’”
Zhao’s sentencing comes just over a month after his former rival, Sam Bankman-Fried, was sentenced to 25 years in federal prison for his role in a yearslong, multibillion-dollar fraud through FTX, which was the second largest exchange crypto exchange before its sudden collapse in the fall of 2022.
The back-to-back sentencings underscore a harder line the Department of Justice has taken against financial crimes broadly and crypto in particular.
Crypto investors and businesses have been keen to shake the industry’s reputation as a financial system for criminals and pivot toward the mainstream.
But crypto skeptics tend to view the entire $2 trillion industry with suspicion and say the DOJ hasn’t done nearly enough to combat it.
”‘Crime pays’ is the message sent today” by the Justice Department, Dennis Kelleher, CEO of the nonprofit Better Markets, said in statement Tuesday. “It didn’t even charge CZ with money laundering; he was only charged with not having an anti-money laundering program. That’s less than a slap on the wrist.”
Clarification: This story has been updated to more fully describe the charges against Zhao.
