Federal prosecutors have recommended a 36-month prison sentence for Changpeng Zhao (CZ), the cryptocurrency exchange Binance’s former CEO, for U.S. law violations.
Prosecutors contend Zhao’s deliberate non-compliance facilitated massive unlawful transactions, impacting national security and financial systems.
CZ’s Legal Woes Deepen With Proposed Three-Year Prison Term
Changpeng Zhao, referred to as “CZ” and the brain behind Binance, chose a path of defiance against U.S. regulatory norms to scale his business, turning Binance into the world’s leading cryptocurrency exchange. According to court documents, Zhao ignored critical anti-money laundering (AML) requirements and other regulatory measures, risking the integrity of U.S. financial operations and enabling transactions with sanctioned entities, including Iran.
“As Zhao admitted, breaking U.S. law was critical to the company’s success and profitability,” the court filing states. “Zhao bragged that if Binance complied with U.S. law, it would not be ‘as big as we are today.’”
Prosecutors highlighted that Zhao’s decisions led to over $898 million worth of prohibited transactions between U.S. persons and those in sanctioned regions. Binance’s lack of compliance mechanisms allowed illicit financial flows, including money laundering and funding for illegal activities. This misconduct not only boosted Binance’s profits significantly but also positioned Zhao among the richest in the cryptocurrency industry, demonstrating a clear motive behind his regulatory disregard.
“Zhao calculated that compliance was too expensive,” prosecutors insist. “Binance would have to either implement effective AML controls, including KYC measures and transaction monitoring, which would cost both money and customers who would leave Binance rather than provide required information, or offboard lucrative U.S. customers, limiting its growth,” the court filing contends.
The sentencing recommendation for Zhao is pivotal, aiming to set a stringent deterrent for similar violations within the financial sector. The U.S. authorities are pushing for a strong message that profitability cannot override compliance with legal standards. This case underscores the escalating scrutiny and regulatory expectations facing the cryptocurrency exchanges operating within or targeting U.S. customers.