According to the United States Sentencing Guidelines, CZ could face a 12- to 18-month prison sentence, but the Department of Justice is willing to fight for a longer sentence.
Despite admitting guilty to breaking the United States Anti-Money Laundering rules in a settlement with the Department of Justice, Changpeng “CZ” Zhao’s legal difficulties appear to be just beginning, according to a new court filing.
Zhao is expected to be sentenced in February 2024. He is currently fighting the government’s efforts to block his return to the United Arab Emirates (UAE) while awaiting sentencing with his family. Authorities, however, hinted in a Nov. 24 document that he may face a heavier penalty than previously anticipated:
“According to the defense, Mr. Zhao faces only a “short” sentence and has no reason to flee.” The reality is that the maximum sentence under the Guidelines might be as much as 18 months, and the US is allowed to argue for any sentence up to the statutory maximum of 10 years.”
A potentially longer sentence contradicts legal experts’ agreement. According to former Securities and Exchange Commission officer John Reed Stark’s research, Zhao may face a 12- to 18-month sentence in a minimum-security jail under the US Sentencing Guidelines. However, his legal team is likely to want no jail time or a sentence that combines prison time, home detention, and probation.
Zhao’s importance in the crypto industry may also have an impact on his fate. Stark believes that if the “DOJ does not secure a sentence for CZ that deters future money laundering in the cryptoverse (and elsewhere), the “plea deal” may backfire on the DOJ.”
Screenshot: The government’s response to a motion to reconsider Zhao’s travel restrictions. source: Reuters
It might not be as simple for the DOJ to ask for Zhao to serve a longer sentence in prison. Based on Stark’s analysis, it would require the government officials to present more substantial evidence linking him to illegal activities. He posted on X (formerly Twitter): “Hopefully, the DOJ has something in the works, or perhaps the Binance monitoring and other remedial measures will reveal more egregious and chargeable crimes.”
Zhao was freed on a $175 million bond, which stipulates that he must return to the United States 14 days prior to his February 24, 2024, sentencing date. Stark stated in his remarks that Judge Richard A. Jones is scheduled to review the government’s motion on November 27 and may decide to impose more bond requirements in order to tighten the bail requirements or delaying a decision.
The case of Binance-CZ is causing legal and business experts to disagree. Omid Malekan, an author and adjunct professor at Columbia Business School, claims that the DOJ’s approach to the exchange is very different from conventional finance practices.
“If [banks] had been held to the Binance Standard, hundreds of managing directors might have been sentenced to prison, and there would have been less money available for shareholder buybacks and lobbying. The bankers were smart enough, though, to never question the arrangement.”
Zhao and the U.S. government came to a $4.3 billion settlement on November 21 for allegedly enabling money transfers through the exchange by people involved in illegal activity. He resigned as CEO as a condition of the agreement.
Conclusion
CZ’s departure from Binance is a major loss for the company, but it is also an opportunity for him to start fresh. He is a talented and experienced entrepreneur, and he is sure to find success in whatever he decides to do next. The crypto industry is still in its early stages of development, and CZ is sure to play a major role in its future.
