Changpeng “CZ” Zhao, the creator and previous CEO of Binance, has issued a formal apology in a comprehensive letter to the judge overseeing his trial. This apology comes just days before his sentencing, set for April 30, following a plea deal with the U.S. Department of Justice in late 2023.
Although he had previously waived his right to appeal any sentence under 18 months, the Department of Justice is now advocating for a three-year term.
In his letter to Judge Richard A. Jones of the Western District of Washington, Zhao openly acknowledges his failure to implement crucial compliance measures at Binance and assures that this legal trouble will be his last.
Additionally, Zhao outlines his future intentions, which include supporting biotechnological innovations and youth initiatives. His plea was accompanied by 161 letters from various supporters, advocating for leniency based on his character and contributions.
Zhao’s Extensive Circle of Support
The range of individuals supporting Zhao is vast.
His sister, Jessica Zhao, a former Managing Director at Morgan Stanley, commended him for his ongoing efforts to do good despite his mistakes. She highlighted his careful management during the FTX crisis to ensure that Binance never misused customer funds.
Yi He, a co-founder of Binance and the mother of Zhao’s three children, compared him to a “guardian of the wilderness” in the chaotic cryptocurrency industry.
CZ’s wife, Yang Weiqing, with whom he has two children, mentioned their philanthropic endeavors, including a significant donation to Japan’s disaster-affected areas in 2018. His university student children, Rachel and Ryan Zhao, portrayed him as a supportive father, urging the judge to see their father beyond this single incident.
From the academic industry, Zhao received support from Professor Jeremy R. Cooperstock of McGill University and Associate Professor Ronghui Gu of Columbia University, both highlighting his contributions to technology and innovation.
Further support came from Tigran Gambaryan, Head of Financial Crime Compliance at Binance, who, despite being detained in Nigeria for a separate matter, spoke highly of Zhao’s business skills and philanthropic efforts.
U.S. figures like former Senator and Ambassador Max S. Baucus, and business leaders like Morgan Stanley Managing Director Sean Yang, also submitted letters vouching for Zhao’s character and professional integrity. Even members of the ruling family in the United Arab Emirates provided their endorsements, reflecting Zhao’s broad and positive impact on a global scale.
Legal Arguments and Defense Strategy
Zhao’s legal team is vigorously defending his lack of knowledge about any illegal transactions on his platform, emphasizing that these transactions were a tiny fraction of the exchange’s overall activity and therefore unlikely to have been intentionally facilitated by him.
They argue for probation, citing his non-repeat offense and lack of prior knowledge about the specific illegalities. The defense also emphasized the international nature of Binance’s operations, explaining that as a non-U.S. entity, Binance was not prohibited from serving users in U.S.-sanctioned countries.
This point highlights the unique legal challenge Binance faces, where its automated systems inadvertently enabled transactions between these users and those in the U.S., a situation that has not been previously adjudicated.
In their plea agreement, Zhao and Binance agreed to severe consequences beyond potential imprisonment. Binance has agreed to pay a $4.3 billion fine and will operate under a court-appointed monitor, a position that has yet to be filled.
The legal proceedings have had a significant impact on Zhao’s personal life. Originally scheduled for sentencing in late February, the proceedings were delayed until April 30. Since appearing in court in Seattle, Zhao has been unable to return to Dubai, where he resides with his family.
Throughout the defense filings, Zhao was portrayed as being unaware of the transactions involving criminal funds, directly challenging the notion that he deliberately violated sanctions.
The charge related to sanctions, a narrow and unprecedented application against Binance, alleged that an algorithmic matching engine unknowingly violated U.S. sanctions law by connecting users from sanctioned countries with U.S. users, accounting for a small portion of Binance’s trading volume.
