Here's why Binance founder CZ got off with 4-month 'slap on the wrist'

By Chris Matthews

Changpeng Zhao's lawyers had requested that he be sentenced to probation with no jail time

Binance founder and ex-CEO Changpeng Zhao was sentenced to four months in federal prison Tuesday for violations of anti-money-laundering laws during his time running the world's largest cryptocurrency exchange.

U.S. Judge Richard Jones was skeptical of the government's request that Zhao, also known as CZ, be sentenced to three years in prison despite federal sentencing guidelines suggesting an 18-month sentence due to his cooperation with the investigation and his status as a first-time offender.

Jones said during the sentencing hearing that he believed that Zhao had accepted responsibility for his actions and pointed to the more than 160 letters of support written by Zhao's family, friends and business associates as evidence of his good character.

The government was in a weak position as it sought to impose an above-guidelines sentence because Zhao had pled guilty only to failing to set up an adequate anti-money-laundering program at Binance, rather than to money laundering itself or other more serious crimes.

Dennis Kelleher, president and CEO of the financial-reform group Better Markets, called the decision "an egregious miscarriage of justice" that "sends exactly the wrong message to criminals worldwide," characterizing it in a statement as "less than a slap on the wrist." He noted that Zhao has retained his ownership of Binance and remains one of the wealthiest men in the world.

"Crime pays is the message sent today not by the judge but by the [Justice Department's] weak, minimalist sweet deal with ... CZ," Kelleher said. "CZ, his entire leadership team, and numerous other employees throughout the organization should have been prosecuted to long prison sentences and Binance itself probably should have been put out of business. That is what should happen to criminal organizations."

The government argued in a court filing that "the scope and ramifications of Zhao's conduct were massive," enabling the laundering of hundreds of millions of dollars earned through the sale of illegal drugs, stolen financial information and ransomware payments.

Binance and Zhao also knowingly undermined U.S. sanctions against Iran by enabling U.S. persons to conduct transactions with Iranian nationals and businesses in violation of federal law.

The judge agreed with the government that some jail time was necessary to deter other would-be lawbreakers, even if it was unlikely that Zhao himself would break the law again.

Zhao's lawyers requested that he be sentenced to probation with no jail time, arguing that "he has already shown remorse for his offense and, more importantly, has remediated." They also noted that "no defendant in a remotely similar [Bank Secrecy Act] case has ever been sentenced to incarceration."

Zhao pled guilty to failing to maintain an effective anti-money-laundering program in November, at the same time that Binance admitted to engaging in violations of the Bank Secrecy Act, failing to register as a money-transmitting business and other violations.

Zhao agreed to personally pay a $50 million fine, a small fraction of his estimated $40 billion net worth, while Binance agreed to pay a $4.3 billion fine and to retain an independent compliance monitor for three years to oversee its anti-money-laundering systems.

Binance did not immediately respond to a request for comment.

Binance's utility token, BNB, which can be used at the exchange to reduce transaction fees, was down nearly 4% Tuesday, according to CoinMarketCap. Bitcoin (BTCUSD) was also trading about 5.8% lower on the day, while ether (ETHUSD) fell nearly 8%.

-Chris Matthews

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04-30-24 1626ET

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