Binance founder Changpeng ‘CZ’ Zhao has been sentenced to 4 months in prison

Billionaire Binance founder Changpeng Zhao was sentenced to four months in prison on Tuesday after pleading guilty to charges of enabling money laundering on his crypto exchange.

“You had the means, the financial ability and the people power to make sure that every single regulation had to be followed, and so you failed in that opportunity,” U.S. District Judge Richard Jones told Zhao in federal court in Seattle, according to Reuters report.

The sentence imposed on the former head of Binance was significantly less than the three years federal prosecutors had sought for him. The defense asked for five months probation. Sentencing guidelines call for 12 to 18 months in prison.

“I’m sorry,” Zhao told the judge before receiving his sentence, according to Reuters.

“I believe the first step to taking responsibility is fully admitting mistakes,” Zhao it is reported said earlier Tuesday in court. “Here I failed to implement an adequate anti-money laundering program … I now realize the seriousness of this mistake.”

In November, Zhao, known as CZ, struck a deal with the US government to resolve a years-long investigation into Binance, the world’s largest cryptocurrency exchange. As part of the settlement, Zhao stepped down as the company’s CEO. Although he no longer runs the company, Zhao is widely reported to have a roughly 90% stake in Binance.

Zhao, who wore a dark blue suit with a light blue tie in court, is accused of willfully failing to implement an effective anti-money laundering program as required by the Bank Secrecy Act and of allowing Binance to process transactions involving the proceeds of illegal activity, including between Americans and persons in sanctioned jurisdictions.

The US ordered Binance to pay $4.3 billion in fines and forfeiture. Zhao agreed to pay a $50 million fine.

Binance is being sued separately by the US Securities and Exchange Commission and the Commodity Futures Trading Commission for allegedly misusing customer assets and operating an illegal, unregistered exchange in the US

The action against Binance and its founder was a joint effort by the Department of Justice, the CFTC, and the Treasury Department, although the SEC was conspicuously absent.

A Binance spokesperson said in a statement to CNBC that the crypto exchange is “proud of the culture of compliance, security and transparency we’ve built over the past few years, and we look forward to building on that culture as we continue to grow.” “

The spokesman said the company had made “significant improvements in compliance”, including in relation to anti-money laundering detection and the “hiring of key compliance personnel”.

A lawyer for Zhao did not immediately respond to CNBC’s request for comment.

Prosecutors say Zhao violated US law on an “unprecedented scale” and that he had a “willful disregard” for Binance’s legal responsibilities.

In an April 23 memorandum, prosecutors said that under Zhao’s control, Binance operated in a “Wild West” fashion.

“Zhao made a bet that he would not be caught and that if he did, the consequences would not be as serious as the crime,” the memo said. “But Zhao was caught, and now the court will decide what price Zhao must pay for his crimes.”

Zhao got off much easier than former crypto rival Sam Bankman-Fried, the founder and former CEO of FTX.

Bankman-Fried was sentenced to 25 years in prison for crimes related to the operation of his crypto exchange. Unlike Zhao and the charges brought against Binance, Bankman-Fried’s failed exchange faced allegations of fraud and misappropriation of customer funds.

Braden Perry, a former CFTC senior counsel, said the conduct is generally seen as more deceptive and financially harmful to a wider range of people than non-compliance.

“CZ’s case appears to focus on regulatory and compliance gaps, while SBF’s case hinges on direct financial abuse and fraud,” continued Perry. “The lapses in compliance, while serious, can be seen as a oversight lapse rather than active abuse.”

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