Binance Founder Faces 3 Years in Prison: DOJ’s Sentencing Memo Revealed

• The US Department of Justice has filed a sentencing memo in the lawsuit against Changpeng Zhao, recommending an extension of the sentence to three years. 

• According to the filing, Zhao was aware of all the illegal transactions facilitated on the platform and even encouraged it. 

Last year, Binance Founder Changpeng Zhao (CZ) was made to step down as the CEO of the largest crypto exchange by trading volume, after pleading guilty to breaking U.S. anti-money laundering laws. His decision was part of a $4.3 billion settlement described by prosecutors as one of the largest corporate penalties in US history. 

For context, Binance was charged for failing to report more than 100,000 suspicious transactions facilitated by organizations flagged by the US as terrorist groups as earlier reported by Crypto News Flash. The exchange was also accused of failing to report transactions with websites known for child sexual materials and also appeared to be one of the largest beneficiaries of ransomware proceeds. After a comprehensive investigation, the Commodity Futures Trading Commission (CFT) dragged Binance’s former chief compliance officer Samuel Lim into the lawsuit.

Months after this legal showdown grabbed headlines of major news outlets, the US Department of Justice (DOJ) has finally filed its sentencing memo in the lawsuit against CZ. According to the filing, the DOJ recommends that the Washington federal Judge Richard A. Jones subjects Changpeng Zhao to a prison term of three years. On top of that, a $50 million fine has been asked to be imposed on him for his violation of the US money laundering laws. 

Why Does the DOJ Recommend 36 Years for the Binance Boss?

According to initial reports, CZ was liable for up to 18 months in prison in addition to the $50 million fine. However, investigation discloses that CZ did not only know about the money laundering violations, but he also encouraged it. This is evident in the court document which accuses the Binance boss of encouraging the members of his team to “better ask for forgiveness than permission.” He is also reported to have said that “if Binance complied with US laws, it would not be as big as it is today.”

The court document reads:

Despite knowing that Binance was required to comply with the US laws, Zhao chose not to register the company with the US regulators; He chose not to comply with the fundamental US Anti Money Laundering Requirements; He chose not to implement and maintain an effective Know-Your-Customer (KYC) system.

Contrary to the statements made in the filing, the defense counsel argues that CZ had no knowledge of any criminal-related transactions on the platform. Responding to the argument that CZ was aware of the transactions orchestrated by users from US-sanctioned countries, the defense counsel argues that Binance is a non-US exchange and, henceforth, was never prohibited from accommodating users from such regions. Even so, transactions from US-sanctioned regions only represent a small fraction of Binance’s total volume.

With all being said, the defense team urged the judge to sentence their client to probation. This is supposed to be in a form of confinement in his home in Abu Dhabi. In addition to this plea, CZ and 160 people which include his family and friends have submitted letters, pleading with the judge to be lenient.

The hearing is expected to occur on April 30 after it was postponed from February 2024.