Changpeng Zhao, the billionaire founder of Binance, has commenced a four-month sentence at a low-security federal prison in Lompoc, California. Zhao, known in the crypto world as “CZ,” pled guilty to enabling money laundering through his crypto exchange. This sentence is notably shorter than the three years sought by federal prosecutors. In court, CZ expressed regret for his actions, acknowledging his failure to implement adequate anti-money laundering measures.
Key Points:
- Binance’s billionaire founder, Changpeng Zhao, has reported to a low-security federal prison in Lompoc, California.
- Zhao was sentenced to four months in prison in April after pleading guilty to charges of enabling money laundering at his crypto exchange.
- The sentence was significantly less than the three years federal prosecutors had sought.
The Background Story
Changpeng Zhao, the former CEO of Binance, is now serving a four-month sentence at a low-security federal prison in Lompoc, California. Zhao, who founded Binance and led it to become the world’s largest cryptocurrency exchange, reported to the facility following his April sentencing.
Zhao’s defense team at Latham & Watkins confirmed to CNBC that Zhao, commonly known as “CZ,” is currently in custody. He pled guilty to charges of enabling money laundering through his crypto exchange, a serious violation that brought intense scrutiny from federal authorities.
The sentencing was notably lighter than the three years prosecutors had pursued, with Zhao receiving a four-month prison term instead. Zhao’s defense had argued for five months of probation, while sentencing guidelines suggested a term of 12 to 18 months.
Before his sentencing, Zhao expressed remorse in court, saying, “I’m sorry. I believe the first step of taking responsibility is to fully recognize the mistakes. Here I failed to implement an adequate anti-money laundering program. … I realize now the seriousness of that mistake.”
In a significant move last November, Zhao reached a deal with the U.S. government to settle a multiyear investigation into Binance. This agreement required Zhao to step down as CEO. Despite stepping down, Zhao is believed to retain a 90% stake in Binance.
The charges against Zhao included failing to implement an effective anti-money laundering program as required by the Bank Secrecy Act and allowing Binance to process transactions involving unlawful activities, including those between Americans and sanctioned jurisdictions. Consequently, Binance was ordered to pay $4.3 billion in fines and forfeiture, and Zhao agreed to a $50 million personal fine.
In a related note, FTX’s founder Sam Bankman-Fried is also serving time in federal prison in the U.S. Bankman-Fried, convicted on all seven criminal counts against him, was sentenced to 25 years in prison for a securities fraud conspiracy that collapsed his exchange and hedge fund, Alameda Research. Unlike Zhao, Bankman-Fried did not cooperate with the government, leading to a much harsher sentence.
Caroline Ellison, Alameda’s former CEO and Bankman-Fried’s ex-girlfriend, played a crucial role as a government witness in his trial.
For more updates on this developing story, stay tuned to FinTelegram.