Changpeng Zhao, the founder and CEO of Binance, the largest cryptocurrency exchange globally, faces a sentencing recommendation of three years imprisonment from the US Department of Justice (DOJ). This follows his guilty plea last year to charges concerning severe lapses in the company’s anti-money laundering (AML) controls, as mandated by the US Bank Secrecy Act.

A “Message” To The Binance Founder And The World

Zhao’s explicit disregard for US regulations was underscored by the DOJ in a scathing sentencing memorandum. They quoted Zhao’s own words, highlighting his approach to legal compliance: “Better to ask for forgiveness than permission,” suggesting a strategic bypass of regulatory requirements to expedite Binance’s market expansion and profitability.

The DOJ laid out the case against Zhao, describing how his decisions to flout US laws were integral to Binance’s business strategy, which aggressively targeted US customers without adhering to requisite legal standards. “Zhao’s willful violation of US law was no accident or oversight. He made a business decision that violating US law was the best way to attract users, build his company, and line his pockets,” the US Attorney’s Office stated.

According to the DOJ, Zhao’s actions enabled Binance to operate a ‘Wild West’ model of cryptocurrency exchange, inviting illicit financial flows. The memorandum notes, “As a result, Zhao is one of richest people in the world and a celebrity in the crypto industry. Zhao bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime.”

The prosecution detailed how Zhao’s failure to implement an effective AML program led Binance to process hundreds of millions of dollars worth of transactions violating US sanctions against Iran and other countries, quantifying the total at approximately $898 million.

The sentencing memorandum emphasizes the gravity and scale of these violations, stating, “Zhao knew that his decision not to implement an effective AML program would result in Binance facilitating transactions between US users and users in Iran and other sanctioned countries and regions in violation of US law.”

In light of these findings, the DOJ is recommending a sentence that would go beyond the federal guidelines, suggesting a 36-month term of imprisonment to “reflect the seriousness of the offense, promote respect for law, afford adequate deterrence, and serve as just punishment for Zhao’s criminal acts.”

Zhao’s sentencing is poised to set a precedent in the regulatory oversight of the crypto industry, particularly concerning compliance with US financial laws. The outcome will likely resonate across the crypto landscape, potentially reshaping how exchanges operate in compliance with US regulations. The DOJ’s closing remarks in the memorandum drive home the broader implications of Zhao’s sentencing: “The sentence in this case will not just send a message to Zhao but also to the world.”

The final sentencing decision, expected to be delivered on April 30, marks a crucial juncture for the legal scrutiny of crypto operations within the United States.

At press time, BNB traded at $607.7.

Featured image from South China Morning Post, chart from TradingView.com