Binance's billionaire founder to find out if prison time is coming — here's what lawyers are expecting
Changpeng Zhao, the founder and former CEO of crypto exchange Binance, heads to a Seattle courtroom on Tuesday to learn whether the crimes he admitted to committing will land him in prison for an extended sentence.
In November, Zhao pleaded guilty to enabling money laundering at Binance. As part of his plea deal with the Department of Justice, Zhao agreed to step down as CEO. For months, U.S. District Judge Richard Jones has been weighing the appropriate punishment for Zhao, also known as CZ.
Once a titan of the crypto sector, Zhao grew Binance into the world's largest centralized crypto exchange globally. The company held assets of more than $65 billion by the time he stepped down. Unlike rival exchange FTX, which collapsed into bankruptcy when founder Sam Bankman-Fried was criminally charged, Binance has continued to operate.
Assets on the Binance platform totaled more than $122 billion, according to blockchain data firm Nansen, a roughly 88% jump that follows a sharp increase in crypto prices in recent months.
Prosecutors say Zhao violated U.S. law on an "unprecedented scale," according to their sentencing memorandum to the court, and that he showed a "deliberate disregard" for Binance's legal responsibilities, operating the exchange on a "Wild West" model.
Zhao is accused of, and pled guilty to, willfully failing to implement an effective anti-money laundering (AML) program as required by the Bank Secrecy Act.
five months in its presentence report, according to a filing from the defense.
More than 160 of Zhao's supporters, including family members, Binance customers, and Emirati royalty, have written notes to the court to appeal for mercy.
Prison time likely
Most experts who spoke to CNBC about the upcoming sentencing predict Zhao will spend some time behind bars.
"This is a high-profile case and the judge will feel pressure not to be soft during sentencing," Former federal prosecutor Neama Rahmani told CNBC. He expects a sentence of a year or two.
Braden Perry, a former senior trial lawyer for the CFTC, said federal sentencing guidelines provide a framework but allow judges some discretion.
Former federal prosecutor Paul Tuchmann also expects some prison time due to the failure to implement AML requirements, as well as the volume of funds that flowed through Binance without being subject to such controls.
"While he is a first-time offender, those factors I just mentioned are likely to outweigh the lack of criminal history," Tuchmann said. "The need for general deterrence in the crypto industry, and the financial sector generally, is so great, that I assume that DOJ will take the position, and a judge will likely agree, that a message needs to be sent through this sentence that the consequences for violating these rules can't just be seen as a cost of doing business."
Los Angeles corporate law attorney Tre Lovell said a shorter sentence, in the range of five to seven months, is likely, along with extended probation.
Lovell added that, unlike Bankman-Fried, who was convicted of fraud and sentenced to 25 years in prison, Zhao hasn't been charged with fraud or other crimes deserving of a longer sentence.
"In addition, his letter to the judge does reflect remorse, discusses his making of poor decisions, and indicates that the Binance platform has instituted strict anti-money laundering controls at his direction," Lovell said.
David Weinstein, a former federal and state prosecutor who now practices as a corporate compliance and white collar defense attorney at Jones Walker, said prison sentences represent an important deterrent.
"I think the sentence will end up just under a year," he said.
WATCH: Bankman-Fried sentencing
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