Changpeng “CZ” Zhao, the founder and former CEO of Binance Holdings Ltd., the world’s largest cryptocurrency exchange, was sentenced to four months in prison for willfully failing to implement an effective anti-money laundering program as required by the United States Bank Secrecy Act.
CZ was punished after pleading guilty to the crime in a November settlement between Binance and the US authorities. The settlement includes a $4.3 billion payment to satisfy claims of violating sanctions and money transmission regulations. As part of the deal, CZ stepped down as CEO and paid a $50 million fine.
District Judge Richard Jones of Seattle imposed the jail term. Lawyers for CZ contended that he deserved no prison time because no one had ever been imprisoned for violating the Bank Secrecy Act, while attorneys for the Department of Justice requested a three-year sentence.
Notably, CZ willingly brought himself before the court while living in the United Arab Emirates, which does not have an extradition relationship with the United States. CZ is also not a citizen of the United States, but rather of Canada.
In a letter to the court, CZ stated, “There is no excuse for my failure to establish the necessary compliance controls at Binance,” and “I wish I could change that part of Binance’s story.” He went on to say that “but under my direction, Binance has now implemented the most stringent anti-money-laundering controls of any non-US exchange, and those controls have been in place since 2022.”
According to Bloomberg, one of the claims against Binance is that CZ prioritized his company’s expansion over compliance, allowing Binance to skirt restrictions that apply to financial institutions serving US customers. The lack of an AML program is believed to have resulted in negative actors, including hackers and terrorist groups like al-Qaeda and ISIS, trading bitcoin on the Binance platform.
Aside from the punishment and the implementation of severe AML regulations and other regulatory requirements, Binance is largely untouched by the investigation and ruling. According to CNBC, the exchange had a trade volume of $18.1 trillion in 2023, while its market share of the global crypto trading industry has decreased somewhat to 41.6%, down 1.4 points since CZ stepped down as CEO late last year.