Changpeng "CZ" Zhao, the founder and former CEO of the major cryptocurrency exchange Binance, received a four-month prison sentence on Tuesday. U.S. District Judge Richard Jones handed down the sentence, diverging from the Department of Justice's (DOJ) recommendation for a three-year sentence.

During the sentencing hearing, Judge Jones expressed skepticism about the DOJ's arguments for a lengthier sentence, highlighting a lack of evidence that Zhao was aware of illegal activities on Binance's platform. "There's no evidence that the defendant was ever informed" of such activities, he stated in the Seattle courtroom.

Zhao was accompanied by family members including his mother, sister, nephew, and son. In his statement before the judge, Zhao emphasized "the importance of having a robust KYC/[anti-money-laundering] program."

The court's Probation Office had recommended a five-month prison sentence in a presentence report, while Zhao's defense team sought no prison time, suggesting probation instead. Zhao's plea deal last year included a $50 million fine, a fraction of his reported net worth. This deal came on the same day Binance agreed to a $4.3 billion fine and saw Zhao step down from the leadership of the exchange he founded in 2017.

Prosecutors argued for a stricter penalty, citing the need for a "meaningful" prison term for Zhao, given the scale of Binance and his deliberate actions to build the exchange while allegedly flouting U.S. law. They contended that without serious consequences for Zhao, the Bank Secrecy Act (BSA) would effectively become meaningless. The defense, however, pointed to Zhao's cooperation with the government and the lack of similar precedents where a defendant was incarcerated.

Zhao's sentence is markedly milder when compared to the 25-year sentence recently given to his former rival, Sam Bankman-Fried of FTX.

As it stands, Zhao has been sentenced to a term significantly less than what the DOJ sought, and his case may set a precedent for future cases.

CoinDesk Article