A recent court filing suggests that Changpeng “CZ” Zhao’s legal challenges are just beginning, despite pleading guilty to violating the United States Anti-Money Laundering requirements in a settlement with the Department of Justice.
Zhao is expected to be sentenced in February 2024. He is currently challenging the government’s efforts to prevent his return to the United Arab Emirates (UAE) while awaiting sentencing with his family. In a filing from Nov. 24, however, authorities indicated that he may face a harsher punishment than initially anticipated:
“The defense claims that Mr. Zhao faces merely a “brief” sentence and has no incentive to flee. The reality is that the top-end of the Guidelines range may be as high as 18 months, and the United States is free to argue for any sentence up to the statutory maximum of ten years.”
A potential lengthier sentence opposes legal experts’ consensus. According to an analysis from former Securities and Exchange Commission official John Reed Stark, Zhao would possibly receive a 12–18-month sentence at a minimum-security prison under the U.S. Sentencing Guidelines. Although his legal team is likely to ask for no jail time or an alternative sentence, combining prison time with home detention and probation.
Zhao’s relevance to the crypto industry may also influence his fate. Stark believes that if the “DOJ does not secure a sentence for CZ that deters future money laundering conduct in the cryptoverse (and elsewhere), then this “plea deal” could end up backfiring on DOJ.”
For the DOJ, seeking longer jail time for Zhao may not be as easy as it seems. According to Stark’s analysis, the government officials would have to produce more substantial evidence implicating him in criminal activity. “Hopefully, DOJ has got something up their sleeve, or perhaps the Binance monitoring and other remedial requirements will reveal more egregious and chargeable crimes,” he wrote on X (formerly Twitter).
Zhao was released under a $175 million bond that requires him to return to the U.S. 14 days before his sentencing date scheduled for Feb. 24, 2024. In his comments, Stark noted that Judge Richard A. Jones is expected to consider the government’s motion on Nov. 27, with the possibility of strengthening the bail requirements through additional bond conditions or delaying a decision.
Binance-CZ’s case is stirring controversy among legal and business experts. According to Omid Malekan, author and adjunct professor at Columbia Business School, the DOJ’s approach to the exchange differs significantly from what is seen in traditional finance.
“If [banks] they’d been held to the Binance Standard there’d be hundreds of managing directors in jail and less money for shareholder buybacks (or lobbying). But the bankers were smart enough to never question the game.”
On Nov. 21, Zhao reached a $4.3 billion settlement with the U.S. government for allegedly allowing individuals engaged in illicit activities to transfer funds through the exchange. He stepped down as CEO as part of the settlement.
Magazine: Deposit risk: What do crypto exchanges really do with your money?