Changpeng Zhao, CZ, the billionaire founder of the colossal cryptocurrency exchange, Binance, has been sentenced to four months in prison. The verdict comes after Mr Zhao pleaded guilty to money laundering offences, contrasting sharply with the three years' imprisonment proposed by prosecutors.
Zhao's sentence comes as the second major repercussion this year in the Ministry of Justice's efforts to crack down on illicit activity in the volatile world of cryptocurrencies.
Just a few months ago, Sam Bankman-Fried, founder of the now-defunct FTX exchange and Zhao's former competitor, was sentenced to 25 years in prison for fraud.
Up until recently, Zhao, known more commonly as 'CZ', together with Bankman-Fried, were the reigning emperors of the multi-trillion-dollar cryptocurrency scene.
Binance, with its huge global presence, processed nearly two-thirds of all cryptocurrency transactions worldwide. However, its fast growth did not go unnoticed by US agencies investigating potential legal transgressions of CZ's business model.
In the face of increasing legal scrutiny, CZ has consistently dismissed all concerns about Binance, often referring to them as 'FUD' (Fear, Uncertainty, and Doubt) - a term employed within the crypto industry to describe baseless rumours aimed at tarnishing a company's reputation.
CZ's Legal Repercussions
A year later, after Sam Bankman-Fried was arrested for fraud, CZ was caught in the crossfire, facing criminal charges. Binance agreed to a staggering $4.3 billion settlement with various US agencies, including the Department of Justice, following accusations that the platform facilitated terrorist groups such as Hamas, Islamic State and al-Qaeda.
The prosecutors claimed that CZ had wilfully disregarded US sanctions, permitting customers from countries such as Iran, Syria and Cuba to use Binance.
Furthermore, Binance allegedly failed to report suspicious transactions relating to narcotics and child sexual abuse documents. Nor did CZ's bold remarks to Binance employees that it was ‘better to ask forgiveness than permission’ and that Binance would not have become ‘as big as it is today’ if it had complied with US laws help its case.
Ultimately, CZ pleaded guilty to a single criminal charge, admitting that he had not put in place a robust anti-money laundering system within Binance. He stepped down as CEO and agreed to pay a $50 million fine. Still, with his fortune estimated at $33 billion (according to Forbes), he remains the richest individual in the cryptocurrency world.
Following his guilty plea, CZ remained in the US and travelled extensively around the country, including New York, Los Angeles and Telluride, Colorado.
He also laid the foundations for his next venture, an online education platform called Giggle Academy, which he says will incorporate artificial intelligence and non-fungible tokens.