US DOJ Seeks Three-Year Jail Term for Former Binance CEO Zhao

Emily Nicolle, Bloomberg News

Changpeng Zhao exits federal court in Seattle, Washington, US, on Nov. 21, 2023. , Bloomberg

(Bloomberg) -- The US Department of Justice recommended a 36-month prison sentence for Changpeng Zhao, the former chief executive officer of Binance, the world’s largest crypto exchange.

The sentence “will not just send a message to Zhao but also to the world,” the DOJ wrote in a court filing on Tuesday, adding the price for violating US law “must be significant to effectively punish Zhao for his criminal acts and to deter others.”

Late last year, Binance pleaded guilty to US anti-money-laundering and sanctions violations, incurring $4.3 billion in penalties as well as having to agree to oversight from authorities. Zhao also pleaded guilty to failing to maintain an effective anti-money laundering program and stepped down as CEO.

A three-year sentence for Zhao, who co-founded Binance, would be double what he was previously expected to serve. In a separate filing, lawyers for Zhao argued he should receive probation instead of prison time, citing a lack of precedent for incarceration in similar cases.

More than 160 of Zhao’s friends, colleagues and investors submitted letters to the court in an effort to convince the judge to be lenient when sentencing him. In his own letter to the court, Zhao apologized for his actions and lamented having to let go of his life’s work when he stepped down from the company.

“I assumed I would be doing that for the next several decades,” he said of his time at the helm. “That life no longer exists for me. It was difficult to come to terms with that at first, but I have accepted it.”

Zhao’s case is the second major sentencing this year for a crypto executive in US courts.

Prosecutors in the case against former FTX boss Sam Bankman-Fried had initially sought a term of up to 50 years for his role in the platform’s 2022 collapse. Criminal sentencing guidelines in that case recommended a 100-year term, but Bankman-Fried was ultimately sentenced to 25 years in prison in March.

Binance pledged to make several changes to its structure and transparency in the wake of its US case, including the establishment of a global headquarters. The exchange received a long-awaited full registration of its services in Dubai earlier this month, after Zhao agreed to give up voting control in the local entity.

(Updates with letters sent to the court in 5th-6th paragraphs.)