The founder and former CEO of Binance, the largest crypto trading platform in the world, was given a four-month prison sentence in Seattle on Tuesday for failing to stop income laundering on the trade.
Both Zhao, who is known as CZ, and Binance pleaded guilty last year to failing to utilize anti- money- fraud plans, with Binance agreeing to pay$ 4.3 billion in fines.
Zhao , pleaded guilty , to one felony count and agreed to a$ 50 million fine.
In a packed court at the national court, U.S. District Judge Richard Jones delivered the word. Lawyers had asked for three years in prison, while Zhao’s prosecutors had requested supervision. The U. S. supervision department recommended a five- quarter word.
Jones, from the chair, said the precise violation of the national Bank Secrecy Act was “unprecedented in terms of the size, level and massiveness”, and that Binance “essentially turned a blind eye” to possible terrorism financing and drug trafficking.
” You have to know that despite riches, power, or rank, no man, regardless of wealth, is immune from prosecution or above the rules of the United States”, Jones told Zhao as he handed down the word. ” You prioritized Binance’s growth and earnings over conformity with United States laws and regulations”.
He attributed Zhao’s willingness to take responsibility for his actions, make up, and come back to encounter fees from the United Arab Emirates, where he lives, a nation without extradition treaty with the United States.
” I failed around, I greatly regret my disappointment and I’m sorry”, Zhao said Tuesday, addressing the determine ahead of punishment. Zhao, who appeared melancholy and focused throughout the two- hours reading, spoke for about four hours, reading from organized notes.
” Both of my families worked really hard to give me possibilities”, he said. For the next chapter of my life, I want to give some opportunities. He has stated that he is launching a free online course with the intention of providing training to children all over the world.
Zhao’s family, boy and girl attended the experiencing. U. S. Attorney Tessa Gorman, the main federal prosecutor in Western Washington, watched from the rear of the court.
Zhao, who left the courtroom without commenting, will probably offer his time at the provincial detention facility in SeaTac.
Federal prosecutors claimed Binance, a key change that manages hundreds of different bitcoin, violated the most fundamental standards set by financial institutions to stop money laundering.
It rejected the idea of putting in place the kind of basic techniques that banks and financial institutions use to stop cash laundering: verifying customers ‘ identities, routinely monitoring purchases, and reporting suspicious activity.
” This was a plan”, Kevin Mosley, a D. C. based national attorney, told the judge Tuesday. In fact, breaking U.S. rules was a part of his strategy to make as much money as probable; breaking the law was a necessary part of that strategy.
One Binance conformity officer, according to prosecution, said the company’s strategy was to inform thieves” come to blockchain we got bread for you”.
Prosecutors noted that Zhao has gained a reputation and incredible wealth as a result of his crimes in arguing for a prison sentence. Bloomberg estimates Zhao’s fortune at nearly$ 43 billion, and he still owns a major share in Binance, despite giving up control of the company.
Zhao’s attorneys argued that Zhao has fully accepted responsibility and that defendants have faced no-prisoner punishment in similar circumstances.
” There is not a single case in which a person convicted of this ( Bank Secrecy Act ) offense”, defense attorney William Burck said,” when there is no other crime alleged, who’s been sentenced to prison. Not a single one”.
Another defense attorney, Mark Bartlett, emphasized Zhao’s life story — he grew up poor in China, before immigrating to Canada, where he worked at a McDonald’s and as a volleyball coach before starting Binance.
” He got into crypto because he wants to change the world”, Bartlett said. He wants a system of finance that would support both Kenyans and New Yorkers.
Binance, which , pleaded guilty to three felony counts,  , also allowed its U. S. customers to illegally interact with countries under economic sanctions, including North Korea, Iran and Syria, according to prosecutors.
Binance, prosecutors said, failed to register with the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN, and to take steps to prevent money laundering on the platform. Instead, prosecutors said, Binance said it would block U. S. customers from its main exchange, even as it took steps to maintain high- value “VIP” customers.
According to the plea agreement, Zhao “knew that U.S. users were essential for Binance to grow,” but that if Binance were to implement anti-money-laundering measures,” some customers would choose not to use Binance and others would be rejected by the compliance process, which would interfere with Binance gaining market share.”
Zhao resigned as Binance’s CEO last year after entering a guilty plea.
According to Justice Department attorneys, Binance and Zhao had been under investigation since 2020.
The case was investigated and prosecuted in Seattle because Binance’s cloud servers are based in Western Washington, according to the charges. In the Seattle area, as well as in some of the illegal transactions involving U.S. citizens conducting business with prohibited countries took place.
Zhao played a prominent role in the downfall of his onetime rival, Sam Bankman- Fried, the former CEO of crypto platform FTX, who was  , sentenced to 25 years , in prison this year.
Zhao stated in 2022 that Binance would buy FTX, which might save the exchange as it struggled to cover its customers ‘ accounts. However, he changed his mind the following day, claiming that FTX’s problems “are beyond our control or ability to help.”
Two days later, FTX filed for bankruptcy, and Bankman- Fried was charged with stealing$ 8 billion from FTX customers ‘ funds. Zhao entered a guilty plea three weeks after Bankman-Fried was found guilty in November.
Zhao’s case was significantly different from the one involving Bankman- Fried. Zhao was charged with, essentially, turning a blind eye to potential criminality on his platform, while Bankman- Fried was convicted of perpetrating a massive fraud on his customers.
” We are not suggesting that Mr. Zhao is Sam Bankman- Fried or that he is a monster”, Mosley said Tuesday. We are not attempting to destroy the cryptocurrency sector.
The Justice Department’s highest levels, however, made a public connection between the two cases, arguing that it was concentrating enforcement on what has long been seen as a lightly regulated cryptocurrency industry.
U.S. Attorney General Merrick Garland reported last year, following Bankman-Fried’s conviction and Zhao’s guilty plea, that the Justice Department had successfully prosecuted the CEOs of two of the largest cryptocurrency exchanges in two separate criminal cases. ” The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal”.
U. S. Treasury Secretary Janet Yellen said last fall that Binance’s “willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform”.
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