American prosecutors say Binance founder Changpeng ‘CZ’ Zhao should serve three years in prison for his repeated and “willful violation” of the law.
On April 23, the U.S. Department of Justice (DoJ) filed a sentencing memorandum with the U.S. District Court for the Western District of Washington ahead of CZ’s sentencing by Judge Richard A. Jones on April 30. Last November, CZ and Binance reached a $4.3 billion settlement with the DoJ following years of flagrant violations of U.S. law that enabled money laundering and terrorist financing on a grand scale.
CZ, who is currently out on a $175 million bond in the U.S. after Judge Jones repeatedly rejected his requests to travel to Dubai, personally pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act (BSA). CZ agreed not to appeal any sentence longer than the 18-month upper guideline range, but the DoJ previously hinted that it could seek a sentence of up to 10 years.
The DoJ’s memo gets straight to the point, quoting CZ telling his team that it’s “better to ask for forgiveness than permission” regarding Binance’s systemic disdain for U.S. legal/regulatory compliance. CZ’s “willful violation of U.S. law was no accident or oversight,” resulting in a message to criminals that a compliance staffer likened to “come to binance we got cake for you.”
In addition to serving as a key tool in bad actors’ ability to launder the proceeds of crime, Binance also “critically undermined the effectiveness of U.S. sanctions against Iran … damaged U.S. national security and endangered the integrity of the international financial system.”
The DoJ claims that CZ “bet that he would not get caught, and that if he did, the consequences would not be as serious as the crime.” The DoJ wants Jones to “send a message to Zhao but also to the world” that the penalty for such flagrant lawlessness “must be significant to effectively punish Zhao for his criminal acts and to deter others who are tempted to build fortunes and business empires by breaking U.S. law.”
Why is everybody always picking on me?
CZ’s team filed its own (redacted) sentencing memo noting that their client has already spent over five months in the U.S. awaiting sentencing and suggesting that CZ serve no prison time whatsoever, merely probation. The memo argues that “no defendant in a remotely similar BSA case has ever been sentenced to incarceration. Mr. Zhao should not be the first.”
CZ’s attorneys claim their client “deeply regrets his offense, and he has shown exceptional acceptance of responsibility and remediation.” They argue that CZ “traveled to the United States voluntarily from a non-extradition country to plead guilty and resigned” as Binance’s CEO, so can we forget the whole ‘facilitation of terrorist financing’ thing and cut him some slack?
CZ filed his own letter to Judge Jones, stating that he has “no excuse” for his multi-year middle finger to Uncle Sam. But if Jones lets him skate, this conviction will be CZ’s sole “encounter with the criminal justice system.”
CZ’s team also filed multiple letters from CZ’s friends and family testifying to his alleged good character, some of which truly stretch the boundaries of credibility and may actually do CZ’s cause more harm than good.
CZ’s current romantic partner and Binance co-founder He Yi had the audacity to tell Jones that “If the cryptocurrency industry is compared to the Wild West, then CZ is the guardian of this wilderness.” Arguing that CZ was simply doing his best in a new industry lacking defined guardrails, Yi claims it was inevitable that CZ didn’t know how to navigate certain regulatory “blind spots.”
Exactly! It’s like all those people who went blind staring directly at the eclipse. How could they know the government had published something somewhere suggesting this was a really dumb idea that anyone with a sliver of common sense should have easily understood? What are we, mind readers?
One of the more awkward testimonials came from Tigran Gambaryan, the former IRS special agent who joined Binance in September 2021. Gambaryan claimed that CZ hired a former fed because he wanted to “raise Binance’s compliance to a standard of excellence.”
We pause here to note that Gambaryan is currently under detention in Nigeria on charges of tax evasion. Binance, which never registered with the local tax office, has also been accused of money laundering and facilitating the manipulation of local exchange rates. Binance has denied these charges despite some observers claiming there’s sufficient evidence to at least proceed with the investigation.
Gambaryan, who has pleaded not guilty to his personal charges, recently had his trial date postponed yet again, this time to May 17. Another local Binance executive, Nadeem Anjarwalla, jumped bail last month but was recently detained in Kenya and is now facing a lengthy extradition fight. It’s all part of the ‘standard of excellence’ that Binance brings to every market in which it operates.
Like the Philippines, whose securities regulator just requested that Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOGL) remove Binance’s app from their respective app stores to “prevent the further proliferation of its illegal activities in the country, and to protect the investing public from its detrimental effects on our economy.” Basically, if Binance raises its compliance bar any higher, cockroaches might just be able to limbo under it.
Undeterred, Binance’s new CEO, Richard Teng, is furiously questioning the role that other assets play in the types of crimes that Binance so eagerly enabled. The same day the DoJ filed its memo, Binance published a blog post citing all the things that are “more likely than crypto to be instruments of financial crime.” Like real estate, gold and luxury goods, all of which have actual real-world purposes, unlike the function-free tokens so actively flogged on exchanges, but whatever.
Cease and delist
It’s worth remembering that CZ was the driving force behind the organized 2019 delisting of the BSV token that was quickly adopted by other exchanges, including Kraken, Shapeshift, to name but a few. It’s also worth noting that, like CZ, most of the individuals/entities that participated in this anti-competitive process have been on the receiving end of serious regulatory blowback for various transgressions of rules they insisted didn’t apply to them.
The BSV Blockchain has always focused on utility rather than speculation, and thus posed a challenge to the ‘crypto casino’ model that has so unjustly enriched criminals like CZ. When CZ’s defenders argue that “money laundering should not even be a crime,” they’re telling you who they are and what they’re about. Ignore this reality at your peril.
If you want to know why the public has tuned out all things ‘crypto,’ consider that the lumpen BTC intends to be nothing more than a digital gold brick. Ethereum wants to be a Rube Goldberg contraption that’s perpetually just one more layer away from perfection. Solana wants to be a meme coin factory. Ripple wants to be a stablecoin because no one wants to use XRP to make payments. They all want to get rich by doing little to benefit anyone but themselves.
Meanwhile, BSV continues to believe that truly scalable enterprise blockchain tech is the perfect platform to (a) enable Web3 applications through cost-effective micropayments, (b) connect millions of Internet of Things devices, (c) improve AI models by verifying training data, (d) ensure supply chain traceability, and so much more.
Better still, BSV is designed to accomplish all of the above while (a) observing all applicable laws and regulations, (b) allowing for digital asset recovery, (c) scaling to meet the needs of tomorrow, (d) ensuring honest nodes observe network access rules that honor Satoshi’s unilateral contract, and so much more.
For those who still hold out hope that there’s more to blockchain than ‘crypto,’ be sure to check out the London Blockchain Conference, which starts May 21 at Excel London. Who knows? Perhaps CZ’s wardens will even let him follow the action on the prison TV.
Watch: Teranode & the Web3 world with edge-to-edge electronic value system
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