Changpeng Zhao, the founder of the world’s largest crypto exchange, Binance, will be sentenced today for money laundering charges in the US.
Prosecutors are pushing for a three-year prison sentence for Zhao, who pleaded guilty to the charges in November 2023, with Binance agreeing upon a US$4.3bn settlement.
The settlement resolved the US Justice Department’s (DoJ) investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).
Zhao, a Canadian national, also pleaded guilty to failing to maintain an effective anti-money laundering (AML) programme at Binance in violation of the BSA, and resigned as CEO.
According to court documents, Binance admitted to prioritising growth and profits over compliance with US law.
The firm launched in 2017 and focused on attracting high-volume customers. It quickly became the largest cryptocurrency exchange in the world, with the greatest share of its customers coming from the US.
Binance was therefore required to register with FinCEN as a money services business and to implement an effective AML programme that was “reasonably designed” to prevent it from being used to facilitate money laundering. The firm failed to do this and also did not implement controls that would have prevented its US customers from conducting transactions in sanctioned jurisdictions.
In order to try and bypass US laws, Binance announced it would block US users from its platform in 2019, and also launched a separate entity called BinanceUS, which was designed to comply with US regulation.
However, Binance “took steps to maintain a substantial number of US customers” according to the DoJ, in particular “VIP” customers who were responsible for a large volume of the firm’s revenue. For example, Binance executives, including Zhao, made a plan to contact VIP customers and help them register a new account as an offshore entity and transfer holdings to that account. Binance employees also allegedly called US VIPs to encourage them to provide information to suggest they were not located in the United States.
Zhao’s defence have argued that he should not receive a prison term, citing the fact he willingly came from the United Arab Emirates to face charges in the US. “I want to take responsibility and close this chapter in my life,” said Zhao when entering his guilty plea.
Zhao is accused of allowing transactions to take place via Binance that were linked to criminal activity including child sex abuse, illegal drugs and terrorism. “He made a business decision that violating US law was the best way to attract users, build his company, and line his pockets,” said the DoJ in a statement last week.
Zhao will be sentenced in Seattle later today.
UPDATE: Zhao was sentenced to four months in prison for money laundering charges.
