Cryptocurrency mogul Changpeng Zhao, the CEO of Binance, may face a stint in jail lasting less than a year, according to legal experts closely monitoring the case. Drawing parallels to the situation with Arthur Hayes, the former CEO of BitMEX who recently pleaded guilty to Anti-Money Laundering (AML) violations, experts anticipate Zhao's sentence might be similarly lenient.
Hayes, despite facing government pursuit for a prison term beyond the recommended six to 12 months, ultimately received a six-month house arrest sentence in 2022. Legal professionals suggest that prosecutors, considering Zhao's potential evasion tactics, opted for charges that wouldn't drive him to stay abroad. Daniel Silva, a partner at the law firm Buchalter and former federal prosecutor, emphasized the significance of Zhao's guilty plea, stating, "To get the CEO to plead guilty should not be scoffed at."
The sentencing hearing for Zhao is scheduled for February 23 in Seattle, and prosecutors are expected to announce their stance on jail time closer to that date. A Justice Department spokesperson mentioned, "We do reserve the right to seek a sentence above the guidelines."
In a significant development, Zhao agreed to a $50 million fine and faces a maximum prison sentence of 18 months under federal guidelines, committing not to appeal any sentence within that range. Binance, the cryptocurrency exchange Zhao founded in 2017, has asserted it worked diligently to address its issues and has become "stronger, safer, and even more secure."
The accusations against Binance involve allegations that the platform allowed entities like Hamas' Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda, and ISIS to utilize its services. Treasury Secretary Janet Yellen claimed that Binance "turned a blind eye" to these activities. Attorney General Merrick B Garland remarked, "Using new technology to break the law does not make you a disruptor. It makes you a criminal."
Investors reacted swiftly to Zhao's guilty plea, pulling approximately $956 million from Binance in the last 24 hours. The exchange, facing a $4.3 billion payment to U.S. authorities as part of the settlement, now raises questions about its future. Richard Teng, a senior Binance executive who joined in 2021, has replaced Zhao as the new CEO.
While Binance has experienced significant outflows since the announcement, totaling over $65 billion in assets, analysts suggest that relative to its total holdings, the impact is relatively small. The case against Binance involves allegations of failure to report suspicious transactions, including those with terrorist organizations, and non-reporting of transactions related to child sexual abuse materials and ransomware proceeds.
The crypto industry, already plagued by scandals, faces another blow with Zhao's legal troubles, marking a dramatic turn for one of its most influential figures. In contrast, FTX founder Sam Bankman-Fried recently found guilty of defrauding customers of his now-bankrupt crypto exchange, could potentially face decades behind bars.
By fLEXI tEAM