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Founder of Binance, world’s largest crypto firm, sentenced to four months
![Founder of Binance, world’s largest crypto firm, sentenced to four months Founder of Binance, world’s largest crypto firm, sentenced to four months](https://www.livemint.com/lm-img/img/2024/05/01/1600x900/im-954897_1714535648002_1714535951685.jpg)
“You had a responsibility to comply with United States regulations. Not some but all,” U.S. District Judge Richard A. Jones said. “You failed at that opportunity.”
Zhao, 47, pleaded guilty in November to violating U.S. anti-money-laundering requirements. He agreed to step down as Binance’s chief executive and pay a criminal fine of $50 million.
“I deeply regret my behavior and I’m sorry,” Zhao said to the judge. Zhao’s mother, sister, nephew and eldest son appeared at the hearing, sitting in the first row of the gallery. “I fully recognize the seriousness of the mistakes I made. I learned an important lesson here I will carry with me.”
The sentence was a culmination of a multiyear U.S. criminal investigation into Binance and showed how U.S. law enforcers have targeted the national-security and money-laundering risks posed by cryptocurrencies. The government has thrown more of its arsenal at the freewheeling crypto industry, including using sanctions to disrupt exchanges and dealers that allegedly cater to cybercriminals and U.S. adversaries.
Binance was enmeshed for years in a dragnet of U.S. criminal and civil law enforcement, including regulatory claims that it illegally served Americans and violated investor-protection laws. Other large crypto firms face similar investigations and government lawsuits, showing how an industry that once disavowed regulation is now within its grip in the U.S.
Changpeng Zhao—or CZ as his 8.9 million X followers know him—is the biggest face of crypto. He founded the firm in 2017 and turned it into the most important hub of the global crypto market. The criminal probe shadowed the company even as its market share initially grew after the collapse last year of FTX, one of its main offshore competitors.
Binance pleaded guilty to anti-money-laundering violations in a deal with the Justice Department—agreeing to pay fines totaling $4.3 billion and to allow oversight by an independent monitor.
For Zhao, prosecutors had asked the judge to impose a sentence of three years in prison, double the sentencing guidelines of 18 months. By not implementing an effective anti-money-laundering program, Zhao allowed hackers, drug dealers and sanctions violators to use the exchange to move hundreds of millions of dollars, all while making money, they argued.
“Zhao’s willful violation of U.S. law was no accident or oversight,” prosecutors said. “He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets.”
Lawyers for Zhao requested no jail time and a period of probation, citing the founder’s lack of prior criminal history and the ramifications he had already faced, including stepping down as Binance’s chief executive. Zhao also agreed to pay a criminal fine of $50 million.
Zhao’s defense team submitted 161 letters of support on his behalf from family, current and former colleagues, employees of firms Binance had invested in and users of the platform. Binance’s human-relations department reached out to some current employees directly to ask for letters of support for Zhao, according to people familiar with the matter.
Other employees have clashed with Zhao in the past, with the former general counsel being forced out and other lawyers resigning last year, among an exodus of executives, The Wall Street Journal previously reported.
Zhao remains Binance’s majority shareholder. He got into crypto after first hearing about bitcoin during a poker game in Shanghai in 2013. He sold his Shanghai apartment for bitcoin and worked for several crypto startups before launching Binance in 2017.
The crypto exchange quickly amassed a large following, spinning up a website that offered services in many languages to reach potential users around the world. Traders lauded it as easier to use than its rivals.
Prosecutors said that Binance knew in 2018 that it had millions of U.S. users, but didn’t set up a program to detect money laundering or violations of sanctions laws. As a result, Binance processed trades between Americans and users believed to be in Iran valued at $899 million between January 2018 and May 2022.
“Binance critically undermined the effectiveness of U.S. sanctions against Iran,” prosecutors said.
The Binance founder wrote in a September 2019 chat that it was “better to ask forgiveness than permission” for amassing so many American users despite laws that appeared to forbid doing so, according to prosecutors.
Lawyers for Zhao declined to comment, as did a spokesman for Binance.
Binance employees were surprised when Zhao turned up at a Seattle federal courthouse last November to plead guilty to the charge.
The crypto executive slowed down Binance’s settlement discussions in 2023 by telling his lawyers he refused to go to jail or step down, according to people familiar with the matter. Zhao, a Chinese-Canadian, avoided traveling in 2023, staying in the United Arab Emirates, which lacks an extradition treaty with the U.S.
Binance lawyers wanted Zhao to settle the investigation in part because the Justice Department obtained videos of early company meetings with Zhao and executives, people familiar with the matter said. Binance’s lawyers felt the videos showed Zhao’s guilt and described the evidence as “dead to rights,” they said.
Global regulators have investigated Binance for years. The crypto exchange’s headquarters jumped from China to Japan to Malta before the company said it operated without a headquarters.
Countries including the U.K., Singapore and South Africa issued warnings that Binance wasn’t licensed to offer complex financial products to users.
In 2021, the Cayman Islands said Binance wasn’t allowed to operate an exchange from the Caribbean nation. “Binance does not operate a cryptocurrency exchange out of the Cayman Islands,” a Binance spokeswoman told Journal reporters in 2021. That same Cayman entity, Binance Holdings Ltd., pleaded guilty to three counts last November, saying it does business as Binance.com.
Zhao and Binance still face a civil lawsuit from the Securities and Exchange Commission over allegations that they misused customer funds and ran an illegal exchange in the U.S.
Ahead of sentencing for his criminal charges, Zhao had been required to remain in the U.S. despite his efforts to return to the United Arab Emirates, where he lives and has citizenship. Prosecutors said Zhao was a flight risk.
During this time, Zhao launched a new project, an educational platform called Giggle Academy that seeks to provide free basic education from grade 1 to 12.
Meanwhile, Binance has continued to thrive. Trading on Binance reached its highest level in almost three years last month, according to data provider CCData. A new CEO, Richard Teng, took the reins when Zhao pleaded guilty. The exchange is still home to more crypto trading than any competitor.
Dave Michaels, Patricia Kowsmann and Vicky Ge Huang contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Patricia Kowsmann at patricia.kowsmann@wsj.com