DOJ Recommends Three-Year Prison Sentence for Binance Founder CZ Zhao

The U.S. Department of Justice (DOJ) is urging a three-year prison term for Changpeng “CZ” Zhao, the founder and former Chief Executive Officer of Binance, in light of his admission of guilt last year for breaching the Bank Secrecy Act in November.

In documents filed by DOJ attorneys, it's recommended that Zhao serves a 36-month sentence and pays a $50 million fine. The DOJ underscores the global significance of this case, stressing the necessity of a stern penalty not just for Zhao but as a deterrent for similar transgressions in the future.

The filing acknowledges that standard sentencing guidelines typically propose a range of 12 to 18 months. However, it underscores Zhao's deep involvement in Binance's unlawful activities, citing his awareness of the legal violations and active promotion of them.

The DOJ criticizes the adequacy of existing Sentencing Guidelines in addressing Bank Secrecy Act violations, arguing they don't adequately penalize such severe misconduct or its potential threat to U.S. national security.

Zhao, who initially faced a maximum of 18 months in prison under his plea agreement, now faces the possibility of a much longer sentence.

CZ had previously agreed to the $50 million fine and waived his right to appeal any sentence up to 18 months.

The filing highlights the gravity of Zhao's actions, pointing out how he oversaw a massive financial institution processing trillions of dollars in cryptocurrency trades annually, all while flouting U.S. regulations.

The DOJ contends that Zhao's deliberate disregard for legal obligations allowed Binance to handle millions of dollars in illicit proceeds, including funds from darknet markets and crypto mixers.

It argues for an "upward variance" due to the scale of Zhao's wrongdoing, citing Binance's extensive processing of cryptocurrency trades and significant profits from U.S. businesses and customers.

Central to the DOJ's case is Zhao's failure to establish an effective anti-money laundering (AML) program at Binance, which facilitated the exchange becoming a hub for illegal activities like ransomware transactions, darknet market proceeds, and various scams.

Despite the initial sentencing schedule set for late February, it has been postponed to April 30 by mutual agreement.

Meanwhile, Binance also faces repercussions. Alongside Zhao's guilty plea, Binance agreed to a $4.3 billion fine and the appointment of a court-appointed monitor, although the appointment is still pending.