Meet Changpeng Zhao, the former head of Binance, known in the crypto community as CZ. CZ is regarded as a hero, a legend, and a mentor to many. Today marks a significant moment for the world of cryptocurrency as digital asset regulations take center stage. On this day, April 30, 2024, CZ will face the consequences of his actions, and it will serve as a valuable lesson for those involved in decentralized finance.
At the age of 47, CZ resigned as the CEO of Binance in November 2023 after admitting to violating US anti-money laundering laws. Just last month, another prominent figure in the crypto world, Sam Bankman-Fried, also known as SBF, received a 25-year prison sentence for engaging in fraudulent activities and money laundering.
As part of his plea agreement, Zhao has agreed to step down as CEO of Binance and pay a hefty $50 million fine. This is a result of the company’s failure to implement a strong anti-money laundering program and violations of sanctions related to users in Iran, Cuba, Syria, and Russian-occupied areas of Ukraine.
Prosecutors requested a 36-month sentence for Zhao in a Seattle federal court last week. They argued that a sentence twice as long as the recommended 18 months would demonstrate the seriousness of his crimes and emphasize the importance of complying with the law.
However, prosecutors believe that a longer sentence is necessary to truly convey the gravity of CZ’s offense and act as an effective deterrent. Their goal is to send a clear message that “complying with the law is always the right choice.”
The prosecution’s memorandum highlighted the lack of regulation and proper oversight under CZ’s leadership at Binance. It also pointed out the failure to report suspicious transactions, including those involving designated terrorist groups such as Hamas, al-Qaida, and Isis. These transactions were made possible due to inadequate internal controls.
In response, Zhao’s legal team has requested a five-month probation period, emphasizing his willingness to take responsibility for the money laundering offenses. They also highlight the time he has already spent away from his loved ones due to previous orders to remain in the United States.
Supporting documents submitted by Zhao’s legal team include letters from his family, investors, UAE royals, and former U.S. ambassador to China, Max Baucus. These letters highlight his philanthropic endeavors and portray him as a dedicated family man.
Last week, Zhao expressed remorse for his actions in a letter to the judge overseeing the case. He acknowledged the lack of justification for his failure to establish effective compliance controls at Binance.
Despite the hefty fine, Zhao’s financial position as the owner of a major player in the $2.5 trillion crypto market remains unaffected. According to Forbes estimates, his total net worth stands at $33 billion, making him the 50th richest person globally.
However, the decentralized nature of crypto creates inherent contradictions. Based on the Bloomberg Billionaires Index, CZ’s net worth is estimated to be $41.6 billion, placing him as the 29th wealthiest person in the world.
Zhao, a Canadian citizen, immigrated to Canada in his early teens and pursued a career in programming systems for the Tokyo Stock Exchange and Bloomberg after earning a computer science degree from McGill University in Montreal. It was during a conversation about bitcoin at a poker game in Shanghai that the idea for Binance was born in 2017.
In their plea for a lenient sentence, Zhao’s lawyers highlight his admission of guilt, the multimillion-dollar fine, and the absence of jail time as punishment in similar cases involving first-time offenders.
