Binance founder Changpeng “CZ” Zhao’s four-month prison sentence for money laundering appears to be an act of “general deterrence,” with the judge sending a clear message of compliance to the crypto industry, according to lawyer Aaron Lane.
“General deterrence appears to be the main rationale behind the term of imprisonment,” Lane, a senior law lecturer at Melbourne’s RMIT Blockchain Innovation Hub, told Cointelegraph.
“The judge has sent a message, not to CZ individually but to the entire industry, that Anti-Money Laundering compliance must be taken seriously.”
Lane said the United States “was justified” in bringing the charges against Zhao, who pleaded guilty on April 30 to charges of failing to maintain an effective Anti-Money Laundering program.
While the charges were serious, they were “of a regulatory nature” and weren’t directly comparable to FTX co-founder Sam Bankman-Fried’s fraud conviction, which landed him 25 years in prison, Lane added.
Zhao’s four-month sentence, however, was lower than the 18-month sentencing guideline for his crime and much less than U.S. prosecutors’ three-year jail request, which Lane said the judge was critical of for being “too harsh.”
Lane explained that even with a plea deal — where Zhao agreed not to appeal any sentence under 18 months — judges have “broad discretion to arrive at a just sentence.”
“CZ pleaded guilty, accepted responsibility, and had already paid a high price in resigning as CEO and accepting a $50 million fine.”
David Chung, the founding director of law firm Creo Legal, told Cointelegraph that putting Zhao in jail sends “a clear signal to the industry that the wild west days of crypto are over.”
But Chung noted that Zhao “only pleaded guilty to charges of noncompliance with Anti-Money Laundering regulations, not laundering money or any other crime.”
“A prison sentence may be going too far, and a substantial fine and CZ’s resignation may be more appropriate, which is what Binance has already agreed to.”
“I will do my time” — CZ
Meanwhile, Zhao took to X in the wake of his sentencing hearing to thank his supporters, saying he’ll serve his time in jail and stressed the importance of complying with existing laws.
“I will do my time, conclude this phase, and focus on the next chapter of my life (education),” he wrote.
In March, Zhao announced plans to launch an education project, assumedly around blockchain and crypto.
Related: CZ sentenced: A chronology of Binance’s US legal battles
“Our industry has entered a new phase,” Zhao added. “Compliance is super important.”
The ex-Binance boss said the “silver lining” to the saga was that Binance user funds were “SAFU” — safe — even though the crypto exchange had “been under the microscope.”
Zhao and Binance still face a lawsuit from the U.S. Securities and Exchange Commission alleging Zhao misappropriated Binance customer funds — a charge Binance denies.
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