Changpeng Zhao Sentenced to 4 Months in Prison for Breaking Anti-Money Laundering Laws

Changpeng Zhao, the founder and former CEO of Binance, the world’s largest centralized crypto exchange, was sentenced to four months in prison by US District Judge Richard Jones at a Seattle courtroom on Tuesday for his role in enabling money laundering at the company. 

Zhao, also known as CZ, pleaded guilty to the charges in November and agreed to step down as CEO as part of a plea deal with the Department of Justice.

Prosecutors allege that Zhao violated US law on an unprecedented scale, willfully failing to implement an effective anti-money laundering program and allowing Binance to process transactions involving proceeds of unlawful activity. The exchange is accused of operating on a “Wild West” model, processing $18.1 trillion worth of trading volume in 2023, with a significant portion coming from derivatives products.

Despite the legal troubles, Binance has continued to operate, with assets on the platform totaling more than $122.5 billion. However, the company’s market share has dropped since Zhao stepped down, currently standing at 41.6%.

As part of the settlement, Binance agreed to pay $4.3 billion in fines, while Zhao will pay an additional $50 million. He also waived the right to appeal any sentence up to 18 months in prison.

Initially delayed for 30 minutes because the judge had to attend to a personal matter, the sentencing took longer than expected as there was a last-minute argument over legal standards for punishment enhancements. The prosecution tried to get Zhao’s sentence enhanced, while the judge said that the guidelines indicate CZ should serve 10 to 16 months in prison.

“The brazen nature of this conduct does require a sentence that includes a meaningful period of incarceration,” prosecutor Kevin Mosley said in court on Tuesday, emphasizing that the guideline sentence is insufficient given the scale or magnitudes of order of Zhao’s crimes. Later in the proceedings, Judge Jones, in explaining the necessity of jail time to Zhao’s lawyers, said that “this is unprecedented in terms of volume, scale, and massiveness in dollar impact of noncompliance.”

The government sought a three-year prison sentence for Zhao, the probation department recommended five months of custodial sentence, while his lawyers have requested five months’ probation, citing his acceptance of responsibility, history of philanthropy, and time already spent in the US away from family.

Curiously, Zhao’s lawyers also referred to “matters that are under seal” at least twice as a “compelling factor” that the court should consider.

Before Zhao took the stand to speak, The Verge‘s Elizabeth Lopatto, who was present at the sentencing, noted that the prosecution or government had “not exactly covered itself in glory here. If Zhao’s statement is convincing, he might not serve time at all.”

“I’m sorry,” Zhao said adding that “the first step to taking responsibility is to fully recognize the mistakes.” Mosley earlier noted that Zhao has made billions as a result of asking for forgiveness, not permission. This was echoed by Judge Jones who said that he “was deeply troubled” by Zhao’s statement that was used as the opening line of the government’s brief that it was better to ask for forgiveness than permission.

With his $39.7 billion net worth per the Bloomberg Billionaires Index, Zhao may well be the wealthiest inmate in the US. His sentence also comes a little over a month after his rival, FTX’s Sam Bankman-Fried, was sentenced to 25 years in prison, three years of supervised release, and ordered to pay $11 billion in forfeiture after being found guilty of orchestrating multiple fraudulent schemes.

Crypto also fell during the sentencing, with many convinced that the event would push bitcoin to new lows before bouncing back.


Information for this story was found via The Verge, X, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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