Home Editor's Pick CZ Starts Prison Term: Crypto Community Offers Encouragement

CZ Starts Prison Term: Crypto Community Offers Encouragement

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Binance’s former CEO started his four-month jail term this weekend. Changpeng Zhao (CZ), former CEO of cryptocurrency exchange Binance, started his jail term in a low-security federal prison in Lompoc, California, as confirmed to CNBC by CZ’s defense team at Latham & Watkins.

After he pled guilty to money laundering violations on April 30, CZ was free on bail until late May. He will serve four months in prison, which is considered less than the three years federal prosecutors had sought. The defense had requested five months of probation, while sentencing guidelines called for a term of 12 to 18 months.

CZ is in The Can

Binance and CZ were reportedly under investigation by the Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) for years. The case eventually reached a turning point in November 2023, with its founder pleading guilty to violating the Bank Secrecy Act (BSA) by failing to implement an effective anti-money laundering program at Binance.

On Binance’s side, the DOJ declared that the company pleaded guilty to conspiracy to violate the BSA, failing to register as a money-transmitting business, and violating the International Emergency Economic Powers Act (IEEPA).

“I’m sorry,” CZ told the U.S. District Judge Richard Jones before receiving his sentence, according to Reuters. “I believe the first step of taking responsibility is fully recognizing the mistakes. Here I failed to implement an adequate anti-money laundering program. … I realize now the seriousness of that mistake.”

Previously, CZ had stepped down as the company’s CEO as part of a settlement with the U.S. government to resolve a multiyear investigation into Binance. Despite no longer running the company, Zhao is widely reported to have an estimated 90% stake in Binance.

A Light Sentence

Prosecutors accused CZ’s crypto exchange, Binance, of failing to prevent money laundering. This allowed illegal transactions, including those involving Americans and sanctioned countries. Binance was fined $4.3 billion, and CZ himself paid a $50 million fine. According to Bloomberg, he’s still ranking in the top 50 global billionaires.

Despite his incarceration, CZ plans to return to the cryptocurrency industry after his release, maintaining his holdings and engaging in passive investing.

Following news that Binance’s founder started his jail term, the cryptocurrency community has expressed support for CZ. Many view his prison term as a protective measure for Binance.

One Reddit user said that CZ’s actions helped prevent a collapse similar to FTX. Binance is currently the world’s largest cryptocurrency exchange. Compared to FTX, it has a much larger user base and handles a much higher volume of transactions. If it were to collapse, the impact would likely be much worse than FTX.

Sam Bankman-Fried, the founder and former CEO of FTX, was sentenced to 25 years behind bars in the US. In November, the disgraced cryptocurrency mogul was convicted on all seven criminal counts against him for his role in the securities fraud conspiracy that led to the downfall of his cryptocurrency exchange, FTX, and the hedge fund, Alameda Research.

As part of his sentencing in March, Bankman-Fried was ordered to forfeit $11 billion.
Unlike CZ, the founder of Binance, Bankman-Fried did not strike a deal with the government.

Instead, other members of his executive team, including Caroline Ellison, the former CEO of Alameda Research and Bankman-Fried’s ex-girlfriend, cooperated with prosecutors and served as key witnesses against him during his criminal trial.

Earlier this month, Ryan Salame, the former FTX executive, was sentenced to 7.5 years in prison. According to the court ruling, Ryan must endure 3 more years of probation and is obliged to repay more than $6 million in confiscation money and $5 million in compensation.

In September last year, he admitted to crimes accused by U.S. authorities, including conspiracy to make illegal political donations and operating an unlicensed money transfer business.

The post CZ Starts Prison Term: Crypto Community Offers Encouragement appeared first on Blockonomi.

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