Former Binance CEO Changpeng “CZ” Zhao has been sentenced to four months in prison for violating US money laundering laws. The sentencing took place in a Seattle courtroom on April 30, following extensive investigations by US authorities. Despite the Department of Justice’s recommendation for an increased sentencing guideline, Judge Richard Jones stated that there was no evidence to suggest that Zhao had knowledge of any illegal activities at Binance.
This four-month prison sentence, along with substantial fines, may appear lenient in the eyes of US authorities, considering the years-long investigation into the former executive and his cryptocurrency empire. Binance has been the target of multiple probes from 2018 to 2024, involving agencies such as the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
A timeline of events highlights the crackdown on Binance over the years. In February 2018, the Department of Justice initiated an investigation into Binance’s compliance with US Anti-Money Laundering laws and sanctions. Charges related to unlicensed money transmission, money laundering conspiracy, and criminal sanctions violations were being probed. In March 2021, the Commodity Futures Trading Commission investigated whether Binance offered crypto derivatives to US customers without proper registration.
In February 2022, the US Securities and Exchange Commission launched an investigation into the connection between Binance.US and trading firms Sigma Chain AG and Merit Peak. They were examining how these firms disclosed potential links to users. In June 2022, the SEC initiated another investigation into Binance Holdings’ 2017 initial coin offering (ICO) for potential unregistered securities sales.
By March 2023, the SEC and CFTC had accused Binance and CZ of multiple violations. The Commodity Futures Trading Commission sued Binance CEO CZ, compliance chief Samuel Lim, and the exchange for seven counts of trading irregularities and market manipulation. Despite the allegations, Zhao denied any wrongdoing, stating that Binance did not trade for profit or manipulate the market.
In May 2023, the Department of Justice launched another investigation into Binance, focusing on potential violations of US sanctions by allowing Russians to access the cryptocurrency exchange. The probe was part of a broader investigation by the DOJ’s national security division. Although Binance restricted its services in Russia following sanctions imposed in April 2022, it continued to operate in the country until September.
In June 2023, the SEC filed charges against Binance and CZ for violations of securities law. The charges included inadequate market oversight and potential wash trading. The allegations also claimed that Binance failed to restrict US investors from using Binance.com and that Binance.US engaged in wash trading through its undisclosed trading firm Sigma Chain. The suit alleged that funds from Binance and Binance.US were commingled into an account controlled by CZ-associated Merit Peak Limited. Binance.US’s activities in the US were significantly reduced after the SEC obtained an emergency restraining order against the exchange.
The intensifying investigations led to a wave of departures among senior executives at Binance and its affiliated firms. In July 2023, key executives started leaving the company, and this trend continued for months, resulting in at least 10 departures. In August 2023, the DOJ expressed concerns about a potential bank run affecting consumers as they considered fraud charges against Binance. The DOJ explored alternatives to criminal charges, such as fines or non-prosecution agreements, to minimize harm to customers.
In September 2023, Binance.US laid off a third of its workforce and CEO Brian Shroder resigned. The SEC also complained about Binance’s lack of cooperation in the discovery process, citing unintelligible screenshots and unsigned, undated documents provided by Binance.US’s parent company. In November 2023, CZ stepped down as CEO of Binance following a $4.3 billion settlement with US authorities. The settlement included fines for various violations, including the failure to maintain an effective Anti-Money Laundering program. Richard Teng took over as the new CEO of Binance. As part of the settlement, Zhao pleaded guilty to one felony charge and took responsibility for his mistakes.