Binance founder Changpeng Zhao faces sentencing; US seeks 3-year term for allowing money laundering

SEATTLE (AP) — Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, faces sentencing Tuesday in a Seattle courtroom, where U.S. prosecutors are asking a judge to give him a three-year prison term for allowing rampant money laundering on the platform.

Zhao pleaded guilty and stepped down as Binance CEO in November as the company agreed to pay $4.3 billion to settle related allegations. U.S. officials said Zhao deliberately looked the other way as illicit actors conducted transactions that supported child sex abuse, the illegal drug trade and terrorism.

“He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets,” the Justice Department wrote in a sentencing memorandum filed last week.

Zhao’s attorneys, insist he should receive no prison term at all, citing his willingness to come from the United Arab Emirates, where he and his family live, to the U.S. to plead guilty, despite the UAE’s lack of an extradition treaty with the U.S. No one has ever been sentenced to prison time for similar violations of the Bank Secrecy Act, they said.

“I want to take responsibility and close this chapter in my life,” Zhao said when he entered his guilty plea to one count of failing to prevent money laundering. “I want to come back. Otherwise I wouldn’t be here today.”

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But prosecutors say no one has ever violated the Bank Secrecy Act to the extent Zhao did. The three-year prison term they’re seeking is twice the guideline range for the crime. Binance allowed more than 1.5 million virtual currency trades — totaling nearly $900 million — that violated U.S. sanctions, including ones involving Hamas’ al-Qassam Brigades, al-Qaeda and Iran.

Zhao knew that Binance was required to institute anti-money-laundering protocols, but instead directed the company to disguise customers’ locations in the U.S. in an effort to avoid complying with U.S. law, prosecutors said.

The cryptocurrency industry has been marred by scandals and market meltdowns. Most recently Nigeria has sought to try Binance and two of its executives on money laundering and tax evasion charges.

Zhao was perhaps best known as the chief rival to Sam Bankman-Fried, the founder of the FTX, which was the second-largest crypto exchange before it collapsed in 2022. Bankman-Fried was convicted last November of fraud for stealing at least $10 billion from customers and investors and sentenced to 25 years in prison.

Zhao and Bankman-Fried were originally friendly competitors in the industry, with Binance investing in FTX when Bankman-Fried launched the exchange in 2019. However, the relationship between the two deteriorated, culminating in Zhao announcing he was selling all of his cryptocurrency investments in FTX in early November 2022. FTX filed for bankruptcy a week later.