‘I failed’: Crypto king with a $62b fortune sent to jail
By Gene Johnson
Former Binance CEO Changpeng Zhao was sentenced to four months in prison for allowing rampant money laundering on the world’s largest cryptocurrency exchange.
Zhao pleaded guilty in November to one count of failing to take required anti-money-laundering measures and stepped down as Binance agreed to pay $US4.3 billion ($6.6 billion) to settle related allegations. US officials said Zhao deliberately looked the other way as people conducted transactions that supported child sex abuse, the illegal drug trade and terrorism.
Binance chief Changpeng Zhao was sentenced to four months in prison.Credit: Bloomberg
“I failed here,” Zhao said before US District Judge Richard A. Jones issued the sentence. “I deeply regret my failure, and I am sorry.”
“He made a business decision that violating US 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.
Despite Zhao’s well-publicised criminal case, he has held onto his personal fortune though estimates of the size of it vary. Bloomberg says he has a $US39.7 billion ($62 billion) fortune, making him the 38th-richest person in the world. Forbes estimates he is worth $US33 billion ($51 billion). He now becomes the world’s richest prisoner and will enter the history books as the richest person ever to do time in a US jail since his ownership of Binance remains intact.
Zhao’s attorneys, insisted 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 US to plead guilty, despite the UAE’s lack of an extradition treaty with the US. 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.”
Zhao was perhaps best known as the chief rival to Sam Bankman-Fried, the founder of FTX, which was the second-largest crypto exchange before it collapsed in 2022.Credit: AP
But prosecutors say no one has ever violated the Bank Secrecy Act to the extent Zhao did. The three-year prison term they were seeking was twice the guideline range for the crime. Binance allowed more than 1.5 million virtual currency trades — totaling nearly $US900 million — that violated US 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 US in an effort to avoid complying with US law, prosecutors said.
More than 160 friends, colleagues and investors submitted letters in support of Zhao, painting a picture of a humble, charitable family man and innovative entrepreneur who preferred Toyota minivans to luxury cars and his aunt’s home-cooked meals over five-star restaurants.
Once considered the most powerful person in the crypto industry, Zhao, known as “CZ”, was perhaps best known as the chief rival to Sam Bankman-Fried, the founder of 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 $US10 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.
AP, Bloomberg, Reuters
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