(Kitco News) – Prosecutors in the U.S. have recommended that former Binance CEO Changpeng “CZ” Zhao be sentenced to 36 months in prison for his November guilty plea to violations of the Bank Secrecy Act and laws against money laundering.
“Given the magnitude of Zhao’s willful violation of U.S. law and its consequences, an above-guideline sentence of 36 months is warranted,” the prosecutors wrote in a court filing to the U.S. district court for the Western District of Washington on Tuesday.
The recommended sentence is double what is typically seen, with online reports indicating that federal sentencing guidelines set a maximum sentence of 18 months in prison for Zhao, who had agreed not to appeal against any stretch up to that length.
“Zhao’s willful violation of U.S. law was no accident or oversight,” they said. “He made a business decision that violating U.S. law was the best way to attract users, build his company, and line his pockets.”
“That sentence, together with the agreed $50 million fine, is sufficient but not greater than necessary to balance the relevant 18 U.S.C. § 3553(a) factors and achieve the goals of sentencing,” they added.
The prosecutors said sentencing Zhao to twice the maximum 18 months recommended under federal guidelines would reflect the magnitude of his violations and send a message to other would-be violators that they will be brought to justice.
CZ’s legal team has argued that he should only be given probation, ideally with conditions that allow him to return to his home in the UAE. Part of their reasoning centered on the fact that Zhao is ineligible for a minimum-security facility, given that he is not a U.S. citizen.
“The confinement conditions are appreciably more restrictive, there are fewer work and program opportunities, and the inmate population as a whole is more dangerous in low-security facilities than in minimum-security facilities,” Zhao’s lawyers wrote in Tuesday’s memo.
Zhao’s cooperation with the US government should not go unnoticed, the defense added.
They submitted more than 450 pages to Judge Richard Jones on Tuesday evening, hours after the Government filed their recommendations, which included an apology letter from Zhao along with letters from 161 supporters.
“I apologize for my poor decisions and accept full responsibility for my actions,” Zhao wrote. “In hindsight, I should have focused on implementing compliance changes at Binance from the get-go, and I did not. There is no excuse for my failure to establish the necessary compliance controls at Binance.”
After providing some of his back story, CZ noted that he doesn’t “like to leave issues unresolved,” which is why he “voluntarily surrendered and took responsibility in this case – because I want to resolve the issue before this Court and to try again. I want to make things right, close the chapter, turn the page, and focus on the next chapter of my life.”
“Words cannot explain how deeply I regret my choices that result in me being before the Court,” the letter concluded. “Rest assured that it will never happen again. Please accept my assurance that this will be my only encounter with the criminal justice system and that going forward, I will live my life in a manner that will make everyone proud.”
The court appreciated the words of candor for Zhao, but prosecutors appear determined to apply the maximum punishment allowed to serve as a warning to anyone who thinks U.S. securities laws can be flaunted.
“Binance’s decision not to implement an effective AML program as required by US law, despite its reliance on US customers to provide liquidity for the exchange, caused violations of comprehensive US sanctions imposed to protect against the ‘unusual and extraordinary threat to the national security, foreign policy and economy of the United States’ presented by the actions and policies of the Government of Iran,” they wrote.
“While Zhao’s decision to take responsibility and seek forgiveness was the right one, it does not warrant a non-custodial sentence,” the prosecutors said. “Such a sentence would minimize the gravity of his crime and send a message to others inclined to commit these crimes that the cost is low, that, indeed it is better to ask for forgiveness than permission. The Court should reject these arguments and impose a 36-month sentence, demonstrating to Zhao and the world that the right choice, every time, is to comply with the law.”
Following his guilty plea in November, Zhao was ordered to stay in the U.S. until sentencing on a $175 million personal recognizance bond. Binance was ordered to pay the U.S. government $4.3 billion to settle the violations, including a $2.5 billion forfeiture and a criminal fine of $1.8 billion.
Zhao is scheduled to be sentenced in Washington state on April 30.
