- According to the new government motion, Changpeng Zhao could face up to ten years in prison.
- One expert says the crypto industry is unfairly criticised for AML.
Former Binance chief Changpeng Zhao (CZ) should remain free before the verdict, but not leave the United States due to a “managed flight risk”. Such language appears in the DOJ’s new filing.
Breaking News: U.S. DOJ Reveals That Prosecutors May Argue That CZ Should Be Sentenced To 10 Years In Prison
The U.S. Department of Justice (DOJ) charged ChangPeng Zhao (CZ) with, and CZ pled guilty to, one count of violating the Bank Secrecy Act. The charge stems from a mammoth… pic.twitter.com/gJ5EsB082Q
— John Reed Stark (@JohnReedStark) November 26, 2023
On November 21, in the course of a deal with the agency the exchange paid $4.3 billion, and CZ agreed to step down as CEO and pay a $50 million fine.
He posted a $175 million bond, to remain free until the verdict on February 23, 2024. However, prosecutors petitioned to bar the former head of the platform from leaving the United States, citing flight risk, including substantial wealth abroad and limited ties to the country.
The prosecution had then stated that the former Binance chief did not provide clear and convincing evidence that he would not flee if he returned to the UAE.
On November 23, the lawyerschallenged the motion to bar Zhao from leaving the United States.
A hint at a lengthy sentence
Former SEC attorney John Reed Stark noted that, unlike the earlier motion, prosecutors were clear and unequivocal that, when delivering sentence, they could insist that CZ be sentenced to ten years in prison.
“Under the guidelines, the maximum term […] may be up to 18 months. The United States may seek any punishment up to the ten years provided by law. […] The term […] will seem significant to him. This argues in favour of the proposed reasonable constraints”, — the motion says.
The district judge Brian Cuchida set November 27 as the deadline for revisiting his decision on CZ’s bail before the verdict.
Reid Stark allowed that the judge, Richard A. Jones, might strike a compromise, adding conditions to release, demanding new assurances from the lawyer and Zhao, ordering more frequent interactions, or requesting other, more concrete safeguards. The expert did not rule out a delay in the decision.
The former SEC lawyer warned that Zhao, still at large, could help perpetuate money-laundering in the industry. Ultimately, the department’s deal with Zhao could backfire on the DOJ.
“Let’s hope the officials have something up their sleeve. Or perhaps monitoring Binance and other corrective measures will uncover more egregious and punishable crimes. Otherwise, the dismantling of the company could be a slap in the face to CZ. And, unfortunately, an historic injustice of epic proportions,” — warned Reid Stark.
An unpopular view
Omid Malekan, an adjunct professor at Columbia Business School, noted that the Binance settlement with U.S. authorities underscores a nuanced stance toward crypto firms. Opponents of the industry genuinely believe that “digital assets are a particular tool that enables bad actors to do bad things,” he added.
Such scrutiny contrasts with what is happening in the rest of the financial system. In his view, firms that follow best AML practices are still handling large sums of illicit funds.
“All of this is treated as normal because someone filed the paperwork,” the expert explained.
Malekan stated that many on Wall Street could be in prison if TradFi faced the same treatment as Binance in similar cases.
Some thoughts on the Binance settlement, with the preamble that I think companies that don’t like certain laws should still comply with them while campaigning for change.
One interpretation of the government’s suit and the resulting mammoth settlement is that by refusing to…
— Omid Malekan ??♂️ (@malekanoms) November 22, 2023
“Binance was wrong to lie to its customers and wrong to not comply with the requirements. But that doesn’t mean it’s a bad company. Do a five-minute Google search for ‘banks aiding money laundering,’ and you’ll see that financial firms with well-known names have been implicated in much worse things, involving orders of magnitude more money. Binance’s clean contribution to building a more inclusive financial system deserves praise,” wrote the professor.
As a reminder, after Zhao’s resignation, Richard Teng took over as Binance’s chief executive.
In a special feature ForkLog studied the experience of the exchange’s new head and found out how former colleagues assess the prospects of the platform under his leadership.