Compiled by: Jordan, PANews
Part of this article is from: Nikhilesh De , CoinDesk
On April 24, the U.S. Department of Justice stated that Binance founder and former CEO CZ should serve three years (36 months) in prison. According to the reasons given, U.S. Department of Justice lawyers believe that CZ helped Binance violate federal sanctions and money laundering laws, and said that he must pay a greater price, so his sentence should be increased.
Given that a U.S. court will sentence CZ next week, the U.S. Department of Justice suddenly proposed to increase the sentence, which surprised the crypto community.
Why did the U.S. Department of Justice suddenly change its mind?
Last November, CZ announced his resignation as CEO of Binance, and admitted to violating the U.S. Bank Secrecy Act, pleading guilty to criminal charges of anti-money laundering and violating U.S. sanctions, and reached a settlement with U.S. regulators and paid a fine of up to $4.3 billion. Of the $4.3 billion in fines, the settlement with the Financial Crimes Enforcement Network (FinCEN) was $3.4 billion, and the settlement with the Office of Foreign Assets Control (OFAC) was $968 million. Of the $3.4 billion paid to FinCEN, $2.7 billion was paid to the Commodity Futures Trading Commission (CFTC). (Related reading: The CZ era of Binance has come to an end! It spent $4.3 billion to settle with the U.S. Department of Justice, and Richard Teng became CEO)
According to the terms of the previously disclosed plea agreement, CZ's prison term is expected to be reduced from a maximum of 10 years to no more than 1.5 years (18 months) after accepting the fine, so CZ also gave up the appeal and was subsequently released after paying a $175 million bail. His sentencing is expected to be held on April 30. However, the situation seems to have suddenly changed. For some reason, the U.S. Department of Justice suddenly decided to increase the punishment, arguing in the sentencing memorandum filed on Tuesday:
“The verdict in this case sends a signal not only to CZ, but also to the world that CZ violated U.S. law and reaped huge rewards. The cost of such illegal behavior must be huge in order to effectively punish Zhao’s criminal behavior and deter others who attempt to build wealth and business empires by violating U.S. law. Therefore, the court is recommended to impose a sentence of 36 months in prison, which is higher than the guideline.”
According to the U.S. Department of Justice, the increased sentence was partly due to CZ failure to implement an effective anti-money laundering program at Binance, which allowed illegal actors to exploit Binance's exchange in various ways, including operating mixing services that hide the source and ownership of cryptocurrencies; trading illegal proceeds from ransomware attacks; and transferring proceeds from Dark Web market transactions, exchange hacking attacks, and various Internet-related scams, all of which were carried out with CZ knowledge and even encouragement.
Additionally, Binance failed to report more than 100,000 suspicious transactions with designated terrorist organizations, and prosecutors also alleged that Binance was the recipient of most of the ransomware proceeds.
CZ strikes back, and his unknown family affection is exposed
It is reported that just a few hours after the U.S. Department of Justice submitted the sentencing memorandum, CZ defense team submitted its own sentencing memorandum, launching a counterattack against the U.S. Department of Justice.
In the sentencing memorandum of CZ, his legal team stated that no defendant in similar cases has been sentenced to imprisonment. Instead, CZ should be sentenced to probation, which may include house arrest at his home in Abu Dhabi. Binance has more than 170 million loyal users worldwide and attaches great importance to its innovative products and services. CZ deeply regrets his crimes and has shown extraordinary responsibility and remedial measures.
More importantly, the sentencing memorandum of CZ’s legal team mentioned: “Binance is a non-US company, so the sanctions charge against Binance is a narrow charge (the first against Binance). Although the algorithmic matching engine randomly matches users from sanctioned countries with users in the United States, violating US sanctions laws, these random, automated transactions between US users and counterparties in sanctioned countries only account for a very small portion of Binance’s total trading volume (0.00041%). Given this, it is far-fetched to accuse CZ of doing it intentionally. In fact, Binance has been blocking IP addresses from sanctioned countries.”
It is worth mentioning that the sentencing memorandum also mentioned CZ's supporters, including He Yi, the mother of three children, his ex-wife Yang Weiqing, his two adult children with Yang Weiqing, former US Senator and current Binance lobbyist Max Baucus, and dozens of others. It also specifically pointed out that after transforming Binance into an industry leader in compliance and law enforcement cooperation, CZ voluntarily went to the United States to plead guilty and has since remained in the United States, away from his hometown and family for more than five months.
According to the disclosure information, CZ married Weiqing (Winnie) Yang in 2003, and the couple soon welcomed two children, a son and a daughter. Friends who knew CZ recalled that "During this period, CZ was a loyal husband and father", while Weiqing (Winnie) Yang said that CZ took the utmost care of [her] and [their] children, saying: "I still remember clearly that during the infancy and early childhood of our children, Mr. CZ was with our children as much as possible, and rarely missed any opportunity to take care of the children in person, such as changing diapers, feeding, and traveling together."
CZ's commitment to his children continued as they grew older, even after his divorce from Weiqing (Winnie) Yang. CZ's eldest daughter said that although CZ divorced when she was two years old, CZ always gave advice and encouragement as she grew up, and his firm commitment to [her] healthy growth was very obvious.
In 2019, CZ married Yi He and welcomed their first child that year, and soon gave birth to two more children. Even at the peak of entrepreneurial success, CZ's care for his family did not diminish, which laid the foundation for his life. In 2021, when the cryptocurrency market and trading volume hit an all-time high, a friend visited CZ and Yi He's three-bedroom apartment in Singapore, "most of the living area was occupied by children's play mats, and toys were scattered everywhere," and recalled that when CZ's youngest son was playing, "he would turn to his father every few minutes like clockwork, and CZ would give recognition and encouragement to the youngest son."
Now, CZ and He Yi's three young children (one of whom is only 9 months old) all live in the UAE. CZ has not seen them since he pleaded guilty in the United States, and he misses them very much. Zhao CZ legal team stated in the sentencing memorandum that CZ has missed half of his youngest child's life. "As a loving father, this long-term separation from young children has become a part of CZ life."
Not only that, the legal team emphasized that CZ had paid a huge fine, had no criminal record and supported charity, so he should be given a reduced sentence instead of imprisonment.
If nothing unexpected happens, CZ's sentencing will be held on April 30 in the Western District Court of Seattle. This case has attracted great attention in the crypto community and highlighted the importance of compliance and accountability in the crypto industry. As the market matures, regulatory scrutiny becomes more critical, and high-profile cases like this also set precedents for future crypto enforcement actions.
SBF, the founder of the bankrupt FTX, was sentenced to 25 years in prison. However, unlike SBF, CZ agreed to pay a huge amount of compensation, so the final result is likely to be a settlement. At the same time, Binance's exchange business did not experience a large-scale panic flight of funds due to the CZ incident, which seems to have given the entire crypto industry a reassurance. In any case, the answer will be revealed at the end of this month!
