US DOJ Wants 3-Year Prison Sentence for Binance Co-Founder CZ

The U.S. Department of Justice (DOJ) has recommended a three-year prison sentence for Changpeng "CZ" Zhao, the co-founder and former CEO of Binance. This recommendation follows Zhao's guilty plea to violations of the Bank Secrecy Act. 

The DOJ asserts that Zhao's actions, which included enabling the crypto exchange to bypass federal sanctions and money laundering laws, warrant significant punishment. 

"The sentence in this case will not just send a message to Zhao but also to the world. Zhao reaped vast rewards for his violation of U.S. law, and the price of that violation must be significant to effectively punish Zhao for his criminal acts and to deter others who are tempted to build fortunes and business empires by breaking U.S. law," the filing noted.

Alongside the prison term, the DOJ also argues for a $50 million fine, agreed upon by both parties.

The DOJ's sentencing memo criticizes the existing Sentencing Guidelines for the Bank Secrecy Act, claiming they fail to adequately address or punish misconduct of this scale or that jeopardizes U.S. national security. According to the memo, Zhao not only knew about the violations, but also encouraged them.

Defense Argues for Leniency

Contrary to the DOJ's severe stance, Zhao’s legal team has proposed no jail time, advocating instead for probation with possible home confinement in Abu Dhabi. They highlighted his "extraordinary acceptance of responsibility" and the unprecedented nature of his case, stating that similar violations have not previously resulted in imprisonment. 

His attorneys argue that Binance, as a non-U.S. company, was not explicitly barred from having users from U.S.-sanctioned countries.

Further, Zhao's defense counters that he was never directly informed of specific illegal transactions and that transactions involving sanctioned countries constituted a small fraction of Binance's overall trading volume, arguing against the notion that Zhao deliberately facilitated these transactions. They also argue that there is no risk of him repeating his misconduct.

Background and Support for Zhao

Zhao, who led Binance to become the largest global cryptocurrency exchange by volume, has considerable support from notable figures including former U.S. Senator Max Baucus, family members, and others who have vouched for his character and contributions to the industry. 

Zhao stepped down as CEO following his guilty plea and Binance’s hefty $4.3 billion settlement with the DOJ, which included exiting the U.S. market.