In a surprising turn of events, Binance CEO Changpeng Zhao, widely known as CZ, has agreed to a settlement with federal prosecutors, entailing a guilty plea for violating U.S. anti-money-laundering laws. This unexpected development raises the question of whether two of the most affluent figures in the history of cryptocurrency might share a similar fate, considering recent legal troubles in the industry.
Will CZ be imprisoned after pleading guilty?
Just weeks ago, FTX founder Sam Bankman-Fried faced a Manhattan jury’s verdict, finding him guilty of seven counts of fraud and conspiracy. This outcome positioned him for a potentially lengthy imprisonment. Now, with CZ’s plea, the possibility of both influential figures serving time in federal penitentiaries has become a tangible prospect. CZ’s guilty plea centers around violations of the Bank Secrecy Act, which mandates financial institutions to implement measures preventing money laundering.
The maximum prison sentence for such violations is five years. While CZ is compelled to resign as CEO of Binance under the settlement, he is permitted to retain majority ownership. This concession from the Justice Department suggests a willingness to reach a significant settlement with Binance, the world’s largest cryptocurrency exchange. Federal prosecutors won’t determine Zhao’s prison term directly, but they can advocate for a specific sentence. Despite reports indicating the Justice Department’s intention to seek an 18-month sentence, the final decision rests with the judge overseeing the case.
Speculations of incarceration trail the settlement agreement
In past cases related to cryptocurrency and money laundering, where substantial prison sentences were urged by prosecutors, judges often rejected such requests. A notable example involves crypto executive Arthur Hayes, who pled guilty to violating the Bank Secrecy Act while leading BitMEX. Despite prosecutors advocating for a significant prison term, Hayes received six months of house arrest and two years of probation. CZ, like Hayes, lacks a criminal record and has agreed to pay a substantial fine—$50 million in this case.
These parallels suggest that Zhao might be headed towards a similar arrangement involving probation and potentially house arrest, rather than a lengthy prison term. Publicly, Zhao appears optimistic about his plans. In a Twitter post, he expressed intentions to take a much-needed vacation, engage in passive investing in blockchain, DeFi, AI, and biotech startups, and potentially mentor emerging entrepreneurs. Notably absent from his plans is any mention of preparing for incarceration.
Even if Zhao were to face some prison time, the chances of a reunion with Bankman-Fried, his one-time rival, seem slim. Criminals sentenced to 10 years or less in federal custody typically end up in minimum-security federal penitentiaries, providing a relatively decent quality of living for non-violent offenders. On the other hand, Bankman-Fried is anticipated to serve a more extended sentence in a medium-security federal prison, where the environment can be marked by gang-related violence, and inmates are confined to heavily guarded cells.
