Apr 30, 2024 - Economy

Binance founder sentenced to 4 months in prison

Photo illustration of Changpeng Zhao surrounded by abstract lines, bars, and circles.

Photo illustration: Aïda Amer/Axios. Photo: Antonio Masiello/Getty Images

The richest man in the blockchain industry, Binance founder Changpeng Zhao (CZ), was sentenced in a Seattle federal court Tuesday to four months in prison.

Why it matters: U.S. officials had scrutinized the world's largest cryptocurrency exchange for years, but finally brought the company and its CEO to account last fall.

  • Zhao, who goes by CZ, pled guilty to one count of violating the Bank Secrecy Act in November, for failing to implement an effective anti-money laundering (AML) program at the exchange.

Details: The sentence came out more in line with what the defense requested. The government sought an above guidelines sentence of three years.

  • He will not be immediately remanded into custody.

What they're saying: "Everything I see about your history and characteristics are of a mitigating nature and a positive nature," Judge Richard A. Jones of the U.S. District Court for the Western District of Washington, said in the sentencing.

  • Because he is not a U.S. citizen, CZ is not eligible for a minimum security facility.

"I'm sorry," the founder told the court, noting that his company has now implemented anti-money laundering controls. "In my mind, I wanted to do everything possible before stepping down as CEO."

State of play: Binance remains the biggest cryptocurrency exchange in the world, with 101 million visitors over the last month and something like $10 billion in volume per day (though it can be much higher).

  • Its regulatory troubles shook its dominant spot for a little while, but it has since regained everything it lost.

Flashback: Prior to the $4.3 billion settlement involving U.S. criminal and civil charges, CZ had led Binance with an air of aggressive defiance, constantly downplaying any risk of legal woes.

  • Following a thorough 2022 cover story in Bloomberg laying out much of the case against Binance, CZ made a meme of the number 4.
  • He had put out a list of four things to do in 2023, the fourth one was to ignore fear, uncertainty and doubt (FUD), and fake news.
  • Whenever criticism of Binance would come out, he would either post the numeral or a selfie holding up four fingers, the meme widely echoed and cheered by Binance fans on Crypto Twitter.

💭 Our thought bubble: One has to imagine that the whole time CZ was tweeting "4," his company was in negotiation with the U.S. Justice Department.

  • In other words, rank-and-file blockchain believers once again let themselves get played by a major crypto entrepreneur deploying the "ignore FUD" meme.

What we're watching: CZ was not made to give up his stake in the company he founded, but is forbidden from operating it for three years.

  • Meanwhile, he's been stuck in the U.S. awaiting trial, so he's been spending his time taking meetings with influential folks in business and politics and getting ready for his next chapter.

By the numbers: At the start of the trial, Binance's BNB token traded at $556. It had risen to $571 by the time the news broke.

The latest: The court is in the midst of a quick recess. This story may be updated with more details.

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