The world’s leading cryptocurrency exchange, Binance, faces setback as its founder, Changpeng Zhao or CZ, has been sentenced to a four-month prison term by the United State’s federal court in Seattle. Originally, Zhao was on the hook for a potential three-year term but managed to reduce this sentence by pleading guilty to prior charges.
Under CZ’s leadership since its establishment in 2017, Binance saw a rapid ascent to market dominance. Ahead of his court hearing on Tuesday, Zhao offered an apology and a promise to avoid similar legal oversteps in the future.
Following a settlement with the federal government last year, Binance agreed to pay over $4 billion in penalties and fines in response to acknowledged violations, including unapproved money transactions, sanction breaches and illegal anti-money laundering activities. Zhao, alleged to have a personal fortune of around $40 billion, assented to the ruling. The 47-year-old entrepreneur agreed to pay $200 million in fines and step down from his role as CEO.
In November of last year, Binance came under heavy criticism after it was disclosed that the exchange had knowingly facilitated illegal operations by malicious actors. The offenses range from financing terrorism and child exploitation to illicit drug trades.
Binance founder’s prison term and resignation
The revelations led to a global outcry among regulators for increased oversight and regulation of cryptocurrency exchanges, casting a pall over Binance’s reputation. In an effort to repair the damage, Binance committed to improving its user verification process and adhering to international laws and regulations.
This ruling follows a similar verdict involving Sam Bankman-Fried, another prominent figure in the crypto exchange sector. Bankman-Fried was found guilty of participating in a multi-billion-dollar fraud through FTX, the second-largest crypto exchange. The Department of Justice seems to be assertively targeting finance and crypto-related crimes, no matter the size and stature of the exchange involved. As part of this regulatory action, the government is committed to establishing a legal and regulatory framework for the rapidly evolving crypto industry.
In light of these issues, industry experts strive to dissociate the sector from illegal activities and push for broader acceptance. Nonetheless, critics argue that the Justice Department’s current course of action is insufficient. CEO of Better Markets, a nonprofit organization, Dennis Kelleher, notes that the penalties disapportionately target lack of adequate anti-money laundering defenses rather than actual cases of money laundering.
