On Tuesday, Changpeng Zhao, the founder of Binance, was sentenced to four months in prison, after pleading guilty to money laundering charges last year.
The sentence was delivered in Seattle by US District Judge Richard Jones, who said that Zhao had the resources, personnel, and wherewithal to ensure compliance with US regulations, but failed to do so.
The sentencing
Jones referred to a statement made by Zhao that had troubled him deeply. The former Binance CEO had said that seeking forgiveness was easier than asking for permission.
Despite that, the judge did not agree with the request of the prosecutors for a multi-year sentence. Jones said that everything about Zhao’s characteristics and history was positive and mitigating.
In 2017, Zhao founded Binance and the company became the largest crypto exchange in terms of trading volume under his leadership.
This cemented his position as one of the most influential figures in the nascent crypto industry. However, he had been forced to step down from his position last year in November.
This was after a settlement was made with US law officials by him and the exchange, which was worth $4.3 billion.
The issues
According to officials of the US Justice Department, Zhao had created a culture where the company was more focused on growth rather than compliance with US financial rules.
The officials said that the exchange had served American customers without putting proper controls, thereby allowing funds linked to terrorism and virtual theft to flow through Binance undetected.
As part of the settlement, Binance will no longer operate in the US market. Furthermore, Zhao also agreed to pay a fine of $50 million personally.
He also pled guilty to violations of anti-money laundering rules and agreed to stay out of Binance operations for at least three years.
Since he flew to Seattle to enter the plea, Zhao also had to deal with travel restrictions that were imposed on him by Judge Jones under which he could not leave the US.
This is because federal prosecutors considered him a flight risk, as he has an estimated wealth of about $37 billion.
The arguments
Last week, the US Department of Justice had argued that Zhao be sentenced to three years in prison instead of the 18 months that are applicable under the federal sentencing guidelines.
DOJ officials said that a harsher-than-expected sentence would help in deterring future similar activities because Zhao had willfully violated US law.
However, Judge Jones was not in agreement, stating on Tuesday that there was no evidence to show that he had been informed of his illegal activity.
Instead, the judge agreed with the Probation Office assessment, which dictated a prison sentence of 16 months and supervised release of one to three years.
The DOJ said that it did not see Zhao in the same light as Sam Bankman-Fried, the founder of FTX, and he had been given credit for coming in through the plea agreement.
According to the DOJ, a light sentence would give others an incentive to break the law. Eventually, the judge settled on a sentence of four months.