The Department of Justice (DOJ) is recommending that Changpeng Zhao, the founder of the world’s largest crypto exchange, Binance, serve 36 months in prison after he pleaded guilty to violating money-laundering laws.
Federal prosecutors on Tuesday also recommended Mr. Zhao, who founded Binance in 2017, pay a $50 million fine, according to a sentencing memo filed with the U.S. District Court for the Western District of Washington.
Mr Zhao’s sentencing should “reflect the gravity of his crimes,” prosecutors wrote.
“Given the magnitude of Zhao’s willful violation of U.S. law and its consequences, an above-guideline sentence of 36 months is warranted,” prosecutors wrote in the filing. “That sentence, together with the agreed $50 million fine, is sufficient but not greater than necessary to balance the relevant factors and achieve the goals of sentencing.”
The sentencing is twice the maximum prison term of 18 months recommended under federal guidelines.
“A custodial sentence of 36 months—twice the high end of the guidelines range—would reflect the seriousness of the offense, promote respect for law, afford adequate deterrence, and be sufficient but not greater than necessary to achieve the goals of sentencing,” prosecutors said.
Mr. Zhao stepped down as head of Binance in November last year after pleading guilty in a Seattle federal court to one count of violating the Bank Secrecy Act, which establishes anti-money-laundering requirements.
Charges Against Binance
Evading the anti-money-laundering requirements allowed Binance to process transactions involving the proceeds of unlawful activity, including those between Americans and “bad actors” in sanctioned jurisdictions, in violation of U.S. law, prosecutors said.
The crypto exchange also failed to report more than 100,000 suspicious transactions with designated terrorist groups, including Hamas, Al Qaeda, and the Islamic State of Iraq and Syria (ISIS), prosecutors alleged.
Mr. Zhao’s guilty plea followed a years-long investigation by the DOJ into the operations of the crypto exchange, which soared in popularity within a matter of years.
He also agreed to pay a $50 million fine, while the Binance platform was ordered to pay $4.3 billion in fines in exchange for permission to continue operations in the U.S.
Mr. Zhao has been free on a $175 million bond since his guilty plea and agreed not to appeal any sentence within federal guidelines.
Binance has separately been sued by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission over multiple securities law violations, including operating an unregistered national securities exchange, and misleading investors about “non-existent” trading controls.
Zhao Apologizes for ‘Poor Decisions’
In a letter to the court in February, Mr. Zhao apologized for what he called his “poor decisions” and said he accepts “full responsibility” for his actions.
“In hindsight, I should have focused on implementing compliance changes at Binance from the get-go, and I did not,” he wrote. “There is no excuse for my failure to establish the necessary compliance controls at Binance.”
However, in their sentencing memo filed with the court on Tuesday, prosecutors further suggested that Mr. Zhao’s willful violation of U.S. law “was no accident or oversight.”
“He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets,” they wrote.
“Despite knowing Binance was required to comply with U.S. law, Zhao chose not to register the company with U.S. regulators; he chose not to comply with fundamental U.S. anti-money-laundering (AML) requirements; he chose not to implement and maintain an effective know-your-customer (KYC) system, which prevented effective transaction monitoring and allowed suspicious and criminal users to transact through Binance; and even when Binance employees detected suspicious transactions, Zhao’s choices meant those transactions were not reported to U.S. authorities,” prosecutors said.
Mr. Zhao is widely expected to be sentenced on April 30.
Reuters contributed to this report.
From The Epoch Times
