Editor of this issue | Wu Blockchain Blockchain
Main sources:
https://twitter.com/nikhileshde/status/1785353891871383864
https://www.theverge.com/2024/4/30/24144807/binance-founders-sentencing-hearing-liveblog
CZ was ultimately sentenced to four months in prison, far less than the 36 months requested by the Ministry of Justice.
The entire hearing:
CZ arrived at the court early and was taking his seat with his legal team. CZ looked nervous in a dark blue suit and light blue tie. But due to the judge's personal business, the hearing was postponed to 9:30AM PT / 12:30PM ET.
The first piece of heavy information: Judge Jones said he disagreed with the Department of Justice's request to extend the sentence. Judge Richard Jones said he disagreed with the Department of Justice's request to strengthen the sentencing guidelines and increase the sentence from 18 months to 3 years. There was no evidence that the defendant (CZ) had been informed of illegal activities.
Justice Department lawyers argued that the judge should be able to infer that CZ knew about illegal activity, citing a previous case in which a judge inferred that a defendant knew about illegal activity.
Judge Jones said he generally agreed with the Probation Office. The total level is 12, which would result in 10–16 months in prison and 1–3 years of residential surveillance. Opinions will now be heard from the Ministry of Justice, the defense, and CZ before a final ruling is made.
The judge explicitly rejected the Justice Department's request for a longer sentence. The Justice Department lawyer said CZ deliberately tried to access the U.S. financial system. He said: "Violating the law is at the core of his efforts. We are not speculating here. Mr. Zhao said so himself - seeking forgiveness, not permission."
DOJ lawyers said CZ should be commended for turning himself in, but that was already reflected in the plea agreement. “If Mr. Zhao does not face prison time after knowingly and intentionally planning to violate U.S. law to build the world’s largest cryptocurrency exchange and get rich in the process… then no one will face prison time, and the Bank Secrecy Act will effectively become a dead letter.”
"We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster," DOJ lawyers said, adding that their recommendation was not directed at CZ as a person.
“Mr. Zhao and Binance did encourage increased compliance, but this was after Binance was caught…which is what they should have done…While laudable, this is not sufficient grounds for probation here,” the DOJ attorney said. “A probationary sentence here will incentivize others to break the law and do so on the largest scale possible.”
Judge: Your recommendation is twice the sentencing guidelines; does this result in a miscarriage of justice? DOJ: No defendant has such a heavy responsibility; "We do not believe this would result in a miscarriage of justice... The injustice is in the severity of the conduct."
The judge continued to express strong skepticism about the DOJ's arguments seeking a longer sentence, asking for specific legal rationales and other questions. DOJ lawyers continued to emphasize that the sentence must reflect the severity of the crime.
CZ was not satisfied with this. He had been listening to the Ministry of Justice's speech with his brows furrowed, his forehead wrinkled, and he frowned from time to time.
The probation department said it recommended a five-month prison sentence, which it said would be enough to deter the defendant and others "without being overly harsh." It would be one of the longest sentences in the country for such conduct.
The defense said, "When I hear the government discussing crime here, they don't seem to be discussing actual crime," and that is CZ admits to not having an AML program. Sanctions violations are not relevant.
Now it was another defense attorney who spoke, saying that CZ's mother, son, nephew, and sister were present. He pointed to letters of support for CZ, mentioning CZ's coming to the United States. He contrasted another case in which a defendant spent 4.5 years protesting extradition: "[CZ] didn't do that. He chose to come here."
The judge is now asking defense attorneys questions, including verifying whether CZ would benefit from continuing to own Binance.
The defense said he had no control.
The defense said all factors supported a reduced sentence (a lighter sentence).
Judge: The probation department still recommends 5 months. Do you agree?
Defense: I agree, but I think the Probation Department mentioned 5 months and then listed 6 factors you might consider to reduce that term. Defense counsel recommended that CZ receive probation, rather than prison — a sentence very similar to that of BitMEX co-founder Arthur Hayes, who pleaded guilty to the same crime in 2022 and was sentenced to six months of house arrest and two years of probation.
There was a relatively long back-and-forth discussion about precedent and Binance’s own history; the judge asked the defense whether it was suggesting that Binance had implemented KYC/AML without the involvement of law enforcement; the defense said that this was at least “long before the settlement.”
The defense again pointed out that CZ came to the United States voluntarily, rather than staying in the UAE (which the DOJ previously said was commendable, but the other possibility was that CZ became a fugitive).
CZ spoke. He began by saying, “I’m sorry,” and that he wanted to take responsibility for his “mistake.” He noted that Binance already had KYC/AML procedures in place and was cooperating with the U.S. government. “In my mind, I wanted to do everything I could before I stepped down as CEO.”
"Everything I have seen about your history and characteristics is of a mitigating and positive nature," the judge said. The court acknowledged that he came to the United States voluntarily, had no prior violations of the law, and that he had taken "extraordinary and significant steps" in his cooperation with law enforcement. But the nature of the incident was "vexing."
The judge said he read every letter submitted (161) because "it's important to know who you are." The letters paint a picture of someone who is driven by your drive, passion and drive, the judge said: You risked your entire net worth to make Binance a success. It's also clear from the letters that you are a dedicated family man.
The judge said CZ had the people, resources and "funding" to comply with US regulations, but he "failed in that opportunity." The judge said: "After this painful lesson, you have the ability and willingness to reform. "I think we are now entering the actual sentencing phase.
The judge again rejected the Ministry of Justice's request for 36 months in prison. "The court needs to work hard to make an appropriate and reasonable sentence," the judge said. The judge finally sentenced him to four months in prison.
