The U.S. Department of Justice (DOJ) has recommended a three-year prison sentence for Changpeng “CZ” Zhao, the founder and former Chief Executive Officer of Binance.
This recommendation follows Zhao’s guilty plea last year for violating the Bank Secrecy Act last November.
CZ’s Sentencing
According to documents filed by DOJ attorneys on Tuesday night, Zhao should serve 36 months in prison and pay a $50 million fine.
The filing asserted that “the sentence in this case will not just send a message to Zhao but also to the world,” emphasizing the need for a severe penalty to deter similar misconduct in the future.
The filing outlines the DOJ’s assessment of the sentencing guidelines, acknowledging that they typically propose a range of 12 to 18 months. However, it highlights Zhao’s awareness of Binance’s legal violations and his active role in promoting them.
It also criticizes the adequacy of the Sentencing Guidelines in addressing violations of the Bank Secrecy Act, asserting that they fail to sufficiently penalize misconduct of this magnitude or its potential impact on U.S. national security.
Zhao, who initially faced a maximum of 18 months in prison under the terms of his plea agreement, is now confronted with the possibility of a much lengthier sentence.
CZ had previously consented to the $50 million fine and waived his right to appeal any sentence up to 18 months.
DOJ’s Argument
The filing emphasizes the magnitude of Zhao’s transgressions, highlighting how he presided over a massive financial institution that processed trillions of dollars in cryptocurrency trades annually, all while violating U.S. regulations.
The DOJ argues that Zhao’s deliberate disregard for legal obligations enabled Binance to handle millions of dollars in unlawful proceeds, including funds from darknet markets and crypto mixers.
It also states that the scale of Zhao’s misconduct warrants an “upward variance,” pointing to Binance’s massive processing of cryptocurrency trades and its large profits from U.S. businesses and customers.
Central to the DOJ’s argument is Zhao’s failure to implement an effective anti-money laundering (AML) program at Binance, which led to the exchange becoming a hub for illegal activities, including transactions related to ransomware attacks, darknet market proceeds, and various scams.
Despite the initial schedule for sentencing set in late February, it was postponed to April 30 by mutual agreement.
Meanwhile, Binance faces its own repercussions. Together with Zhao’s guilty plea, Binance agreed to pay a $4.3 billion fine and the appointment of a court-appointed monitor. However, the appointment is still pending.
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