Four Months in Prison for Changpeng Zhao, Former CEO of Binance

On 30 April, a trial was held in Washington court, whose defendant was Changpeng Zhao, aka CZ. The former CEO of Binance, one of the best-known cryptocurrency exchange services, was sentenced to four years in prison on charges of violating US money laundering laws.

Judge Richard Jones was rather benevolent towards Zhao, since the prosecution had asked for as much as three years in prison. The shortened sentence was due to the fact that there is no evidence that CZ was ever informed of the specific illegal activities that were taking place in Binance.

Changpeng Zhao's Apology

According to prosecutor Kevin Mosley:

"Incarceration is necessary to reflect the seriousness of the offence. A suspended sentence, in this case, will incentivise others to break the law and to do so to the fullest extent possible."

His comment is that of someone who has not had his pleas accepted and, therefore, is exaggerating in order to bring water to his own mill. In reality, it is not really possible to prove that Changpeng Zhao was aware of Binance's modus operandi and the judge would seem to have acted correctly.

Before sentencing, CZ apologised for his actions and said he would use the time in prison to reflect.

Two Parallel Trials

Zhao taken full responsibility for Binance's culpable failure to adopt an effective anti-money laundering programme. The trial against CZ closely resembles one held a month earlier. In that case, the defendant was Sam Bankman-Fried, the former CEO of FTX, a rival service of Binance, which is now defunct following its bankruptcy in July 2022, at a particularly difficult time for cryptocurrencies.

Sam Bankman-Fried, whose responsibilities in the FTX fiasco are far more serious than those of Changpeng Zhao, was sentenced to 25 years in prison. His lawyers have filed an appeal, both for the sentence and conviction.

The public had been very interested in the trial against the former FTX CEO and long queues had formed outside the court to watch the proceedings against Bankman-Fried. It has to be said that the FTX bankruptcy burnt about 8 billion dollars of investors and, therefore, the interest in the verdict is easily imaginable. For the judgment against Changpeng Zhao, we did not see the same attention.

Changpeng Zhao Said Guilty

CZ put himself at the disposal of justice from the outset. As soon as the investigation started he resigned as CEO and he pleaded guilty to the criminal charge. Binance, in order to stay as clean as possible and protect its reputation, agreed to pay a maxi-money fine of $4.3 billion to the Treasury Department. The settlement only partly protected the exchange, as it did not affect the civil lawsuits against Binace, Binance US and Changpeng Zhao.

The proceedings were initiated by the US Securities and Exchange Commission in June 2023. The one against CZ is the first to be concluded.

For his part, Changpeng Zhao said he would be stepping down from Twitter and made no further comment. After his departure, Binance's former head of regional markets, Richard Teng, became CEO.

Another Trial at the Gates

After the trials against Sam Bankman-Fried and Changpeng Zhao, another trial concerning a prominent figure in the cryptocurrency world is on the horizon: Alex Mashinsky. Soon, the former CEO of Celsius will also be put on the stand. The start of his trial is set for January.

In this industry, it is not uncommon to find oneself dealing with scoundrels, unfortunately. Many operating companies are not as stable as they would have us believe. We at Spaziocrypto can help you find your way around with our guide.