Government says CZ threatened US security, recommends doubling Guideline sentence

The government says Zhao “willfully” and strategically put US national security at risk in order to “line his pockets”


Binance co-founder Changpeng Zhao | Ben McShane/Web Summit via Sportsfile/"BE6_1549″ (CC license)


Prosecutors have asked the court to sentence Binance founder Changpeng “CZ” Zhao to 36 months in prison for violating the Bank Secrecy Act. Zhao’s team argues that probation alone — ideally with conditions that allow him to return to his home in the UAE — is appropriate. 

The government says that Zhao “willfully” and strategically defied US laws in order to “line his pockets” and grow his crypto exchange. His negligence threatened the security of the US, and he therefore deserves an “above-Guidelines” sentence of three years behind bars, prosecutors wrote in their memo Tuesday. 

“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,” government lawyers wrote. 

Read more: Binance, Zhao ‘deliberately’ violated US law, SEC argues

The defense submitted more than 450 pages to Judge Richard Jones late Tuesday evening hours after the Government filed their recommendations. The defense memo includes a letter from Zhao himself and 161 supporters. 

The defense argues Zhao faces unfairly harsh conditions if he is incarcerated. Given that he is not a US citizen, he’s ineligible for a minimum-security facility, his team wrote. 

“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. 

Read more: Judge orders former Binance CEO Changpeng Zhao to ‘surrender’ Canadian passport

Zhao’s cooperation with the US government should not go unnoticed, the defense added. 

Zhao is scheduled to be sentenced in Washington state on April 30. Zhao entered into a guilty plea agreement in November, admitting he failed to maintain an effective anti-money laundering program at Binance. 

“There is no excuse for my failure to establish the necessary compliance controls at Binance. I wish I could change that part of Binance’s story,” Zhao wrote in his letter to Jones. 

“I originally became interested in cryptocurrency because of the inclusiveness and equal opportunity it provides to everyone in the world,” he added, highlighting his philanthropic efforts he would like to continue, ideally not from prison. 

In November, prosecutors hinted that they may vye for a heavier sentence than the 18 months stipulated by federal guidelines, writing to the court that “the United States is free to argue for any sentence up to the statutory maximum of ten years.” 

Zhao has been ordered to stay in the US until the sentencing on a $175 million personal recognizance bond. 

Binance in November agreed to settle charges with the US government for $4.3 billion, including a $2.5 billion forfeiture and a criminal fine of $1.8 billion. 

​​“Almost two years after Binance’s founding, Zhao told senior management that the US market represented 20% to 30% of the company’s potential revenue,” Attorney General Merrick Garland said when the settlement was announced.“ Serving these US customers meant that Binance was a US financial institution. US financial institutions must comply with US law, Zhao and other senior management at Binance understood this.”

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report cover graphics (4).jpg


Despite crypto gaming related projects and funds raising close to a billion dollars in November 2021, there have been only a handful of games that have attracted users apart from mercenary capital, and have had sustained activity for longer than a few months. Crypto gaming is going through an infrastructure phase. Theoretically, crypto gaming stands to benefit from purpose-built, high throughput chains, where blockspace is cheap (especially for games which are fully onchain). However, despite the launch of many gaming-focused chains, most crypto games are lacking in quality and quantity. Most new crypto gaming infrastructure either have no games or only a few games launched (e.g. Xai) or have failed to garner meaningful attention (e.g. Immutable X).


As Bloomberg analysts up their ether ETF approval odds, concerns about ETH’s liquidity and its possible status as a security remain


Ethereum is becoming a multilayered lasagna-like system, pushing people to the margins with its complexity and fees


Ether would be set to re-test its 2021 price high should the regulator unexpectedly approve ETH funds, industry watchers say


The Financial Innovation and Technology for the 21st Century Act, known as the FIT21 Act, is expected to head to the floor for a vote in the House in the afternoon on May 22


NYAG announced details about its settlement with bankrupt lender Genesis on Monday


The $948 million of inflows from May 13 to May 17 roughly equaled the net money that left the fund category over the five prior weeks