Binance founder-CEO Zhao may get 3-year jail term for money laundering charges

Binance CEO trial: The world's largest cryptocurrency exchange Binance is in the eye of a storm once again as its former chief executive officer Changpeng Zhao could face several years in prison as he awaits his sentencing on Tuesday after his guilty plea to violating US money-laundering laws. The prosecutors have told the court that they want Changpeng Zhao, popularly known as "CZ," to serve double the maximum 18 months sentence, which the federal guidelines recommend. 

Prosecutors said a tough sentence for Zhao, once considered the most important person of the crypto industry would send a message that “the right choice, every time, is to comply with the law.” Zhao’s hearing begins at 1600 GMT.

Robert Fisher, a partner at Nixon Peabody in Boston and a former federal prosecutor, expressed surprise over the prosecutors demand for a stiff sentence despite Zhao's plea. Fisher suggested they might be trying to set an example given Zhao's high profile.

"It's unusual to ask for this much time above sentencing guidelines," he said. “They want this to serve as a deterrent.” Zhao’s lawyers requested probation, citing his "unflinching" acceptance of responsibility, and his having already paid a $50 million criminal fine.

They also said Zhao had not committed a crime before, and no defendant in a remotely similar case has been imprisoned. Zhao would be the second major crypto top executive to be jailed after Sam Bankman-Fried was sentenced last month to 25 years for money laundering and stealing $8 billion from customers of FTX, his now-bankrupt cryptocurrency exchange.

Bankman-Fried had pleaded not guilty and said that while he made mistakes he did not defraud customers. He has appealed his conviction and sentence.

Many other crypto moguls are also US authorities after the collapse of crypto prices in 2022 exposed fraud and misconduct across the industry. The 47-year-old Canadian resident Zhao stepped down as Binance's chief in November, when he and the exchange he founded in 2017 admitted to evading money-laundering requirements under the Bank Secrecy Act.

Binance agreed to a $4.32 billion criminal penalty. Prosecutors said Binance used a "Wild West" model that welcomed criminals, and did not report more than 100,000 suspicious transactions with designated terrorist groups including Hamas, al-Qaeda and Islamic State.

They also said Zhao's exchange supported the sale of child sexual abuse materials and received a large portion of ransomware proceeds. Zhao has been free on a $175 million bond, and agreed not to appeal any sentence within federal guidelines. He also paid $50 million to the Commodity Futures Trading Commission.

(With Reuters inputs)