US Department of Justice: Binance founder Zhao Changpeng should be sentenced to three years in prison

Author: Nikhilesh De, CoinDesk; Compiler: Baishui, Golden Finance

The U.S. Department of Justice said late Tuesday that Binance founder and former CEO Changpeng Zhao should be sentenced to three years in prison for helping the cryptocurrency exchange violate federal sanctions and money laundering laws.

After he pleaded guilty in November to violating the Bank Secrecy Act, Justice Department lawyers filed a sentencing memorandum arguing that he should go to prison for 36 months and pay a $50 million fine.

"The verdict in this case sends a message not only to Changpeng Zhao but also to the world. Changpeng Zhao has reaped huge rewards for violating U.S. law, and the cost of such violations must be enormous to effectively punish Changpeng Zhao for his criminal conduct and deter others who seek to build wealth and business empires by violating U.S. law," the document said.

Under the terms of the plea agreement, Changpeng Zhao initially faced up to 18 months in prison. The Justice Department argued in Tuesday’s filing that “the misconduct in which Changpeng Zhao engaged is numerous and for which he should bear numerous consequences.”

“Due in part to Changpeng Zhao’s failure to implement an effective anti-money laundering program at Binance, illicit actors used Binance’s exchange in a variety of ways, including operating mixing services that concealed the origin and ownership of cryptocurrencies; earning illicit proceeds from ransomware attacks; and transferring proceeds from darknet market transactions, exchange hacks, and various Internet-related scams,” the filing said, noting the flow of funds from darknet markets and cryptocurrency mixers.

Much of the filing echoes arguments made by the Justice Department when it first announced charges against Binance and Changpeng Zhao last year, pointing to how the exchange operated within the United States.

The filing also details the Justice Department’s sentencing guidelines calculations, noting that the guidelines recommend 12 to 18 months but say that Changpeng Zhao knew Binance was violating the law and encouraged it.

The filing also takes aim at how the Sentencing Guidelines deal with violations of the Bank Secrecy Act, saying they are “not designed to adequately punish misconduct of this magnitude or misconduct that undermines the national security of the United States.”

The $50 million fine has been agreed to by prosecutors and Zhao's defense team. Zhao also waived his right to appeal any sentence of up to 18 months.

He was originally scheduled to be sentenced in late February, but the hearing was postponed to April 30 by mutual agreement. Since his first appearance in federal court, he has been unable to return to Dubai.

Binance, the world's largest cryptocurrency exchange, pleaded guilty at the same time as Zhao, agreed to accept a massive fine of $4.3 billion and will report to a court-appointed monitor.