Binance founder (CZ) US lawsuit

United States prosecutors are recommending a three-year prison sentence for Binance founder Changpeng Zhao (CZ), following his guilty plea to violating US anti-money laundering (AML) laws.  

Per the  Economic Times report, Zhao’s sentencing is set for April 30, 2023, in Seattle, where a federal judge will decide the fate of the Binance founder and ex-CEO. 

US prosecutors seek stiffer penalties for Binance founder

Zhao could face a stiffer prison sentence than initially anticipated. Prosecutors are advocating for a longer term months after Zhao’s initial agreement to a plea deal that suggested up to 18 months in prison. Recall that Zhao, commonly known as CZ was sued in late 2023 by the US regulators, alongside the Binance exchange. 

In November 2023, CZ  admitted to violating anti-money laundering regulations in a plea deal. This led to his stepping down as CEO of Binance, a leading digital assets trading platform he founded in 2017. Nevertheless, he still holds a significant ownership stake. 

As part of the plea deal, CZ agreed to pay a $50 million fine, while Binance itself committed to paying about $4.3 billion in fines and rebates. Accordingly, the Binance founder was released on $175 million bail with travel restrictions within the US, but prosecutors are now seeking a more severe punishment.

However, in an April 22 court filing, US prosecutors argued that Zhao’s actions had a significant impact on the financial system and that he should face a penalty above the federal sentencing guidelines. They suggested a harsher sentence to serve as a deterrent to others in the cryptocurrency industry who might consider breaking the law to gain personal or corporate advantage. 

“Zhao profited greatly from his breach of US law,” the prosecutors noted in their filing. “The consequence of that breach must be substantial to penalize Zhao for his crimes and to deter others from building immense wealth and business ventures through unlawful means,” they added. 

Related: Crypto community awaits verdict as Sam Bankman-Fried appeals 25-year prison sentence

Where did CZ and Binance fall short?

The accusations against the Binance founder stem from his failure to establish a robust AML program for the crypto exchange. This lack of oversight allegedly allowed illicit actors to exploit the exchange for activities like operating mixing services to hide the origins of cryptocurrency. 

Additionally, prosecutors allege that Binance enabled transactions between Iranian and US customers, potentially violating US sanctions against Iran and putting the exchange’s liquidity at risk.

In February 2024, Binance settled with regulators to resolve major operational lapses, addressing failures in compliance and security. Among the issues, Binance neglected to report over 100,000 suspicious transactions, some of which were tied to known terrorist groups like Hamas, al Qaeda, and ISIS.

Further complicating matters, Binance faced allegations of enabling transactions associated with child sexual abuse materials and proceeds from ransomware activities. These and many more claims led to the tier-one crypto exchange and CZ being sued by the US SEC in late 2023. 

Read Also: Nigerian Government File Tax Evasion Suit Against Binance As Detained Exchange Official Escapes Custody

Despite pleading guilty to the AML charges and committing to pay the initially stipulated penalties, US prosecutors recently submitted that Zhao’s violation of the US laws was significant and intentional, justifying a sentence of 36 months in prison. The court will consider this recommendation during the upcoming sentencing hearing. 

Amid these serious legal challenges, CZ saw his wealth climb substantially over the past year, rising by nearly $10 billion according to the Bloomberg Billionaires Index. His total fortune now exceeds $42 billion, ranking him as the 29th richest person in the world.

It bears mentioning that Binance is faced with similar regulatory problems in Nigeria, India and Russia. While the exchange is reportedly preparing to pay a $2 billion fine to re-enter the Indian market, Binance sold its Russian subsidiary to CommEx. Meanwhile, two of its executives were detained in Nigeria in February 2023, with one later escaping custody in March 2023. Sources say the escaped Binance exec has been arrested in Kenya. 

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