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Binance Founder Jailed: Changpeng Zhao Will Spend His Four Month Prison Sentence at Jail With Controversial History

Last Updated May 1, 2024 8:11 AM
Teuta Franjkovic
Last Updated May 1, 2024 8:11 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Judge threw out DOJ’s request, giving CZ a lighter sentence than recommended.
  • CZ’s cooperation and the lack of proof he knew about illegal activity influenced the judge.
  • Prosecutors argued that non-incarceration weakens regulations, while the defense cited similar cases without jail time.
  • FDC SeaTac prison is more than just bunks; it housed death and assassination plots.

Changpeng “CZ” Zhao, founder and former CEO of Binance, received  a four-month prison sentence on Tuesday.

During the hearing, Judge Richard Jones expressed immediate skepticism regarding the Department of Justice’s arguments advocating for a much longer sentence.

Now Zhao will spend his sentence in the Federal Detention Center, SeaTac. This federal prison has been marked by controversy, including the death of a detainee and a plot to kill federal officials.

Judge Throws Out DOJ Request, Gives Changpeng Zhao Shorter Sentence

In a Seattle courtroom, Judge Jones said  there was “no evidence that the defendant was ever informed” of any illegal activity at Binance. He also disagreed with the US Department of Justice (DOJ)’s recommendation to increase the sentence from the baseline guideline of 10 to 16 months in prison and up to three years of supervised release.

After the hearing finished, a court document  revealed Judge Jones recommended Zhao serve his sentence at the Federal Detention Center, SeaTac. However, the Bureau of Prisons will make the final decision on the location. Additionally, the Probation and Pretrial Services Office will determine the date by which Zhao must surrender himself.

Zhao, sporting a buzz-cut and dressed in a navy blue suit with a light blue tie, heard his sentence in court alongside his mother, sister, nephew, and son. As part of a plea deal last year, Zhao agreed to pay a $50 million fine, a minor portion of his estimated net worth. Recent reports suggest that he could have assets totaling around  $43 billion.

Beyond Booking & Bunk Beds: Inside the Federal Detention Center, SeaTac

The Federal Detention Center, SeaTac (FDC SeaTac)  is close to the Seattle–Tacoma International Airport in Washington state. It opened its doors in September 1997 with a capacity to house 1000 inmates. The facility accommodates both male and female sentenced inmates, as well as pre-trial, holdover, and immigration detainees. Upon arrival, inmates receive a “standard bed roll” which includes bedding and towels. After being assigned to a unit, they are measured for and given clothing, , and issued an identification card, which must be carried at all times, except when going to and from showers.

One notable detainee was Roxanna Brown , director of the Southeast Asian Ceramics Museum. Brown died in a cell at this detention center on May 14, 2008. She passed away shortly after being arrested for alleged wire fraud on May 9, upon her arrival in the US to speak at an Asian art symposium at the University of Washington. Prosecutors dropped charges against her posthumously.

In another incident , on June 16, 2009, the Federal Bureau of Prisons asked to transfer Clayton Roueche, a member of the United Nations gang, from SeaTac to the US Penitentiary in Marion, Illinois. This followed the uncovering of a plot with fellow inmate Luke Elliott Sommer to assassinate three federal prosecutors and the warden of the detention center. Roueche was ultimately moved to the US Penitentiary in Lee County, Virginia.

Lighter Sentence Looms for CZ: KYC Regrets and Cooperation Ease

Just a few moments before judge called for a final decision, Changpeng Zhao commented :

“I think the first step to taking responsibility is to fully recognize the mistakes. Here, I failed to fully set up a [know-your-customer program]. I also recognize the importance of having a robust KYC/[anti-money-laundering] program. That is why I directed Binance to cooperate with the investigation.”

The former leader of the world’s largest cryptocurrency exchange pleaded guilty in November to a single charge of violating the Bank Secrecy Act. This offense could typically lead to a sentence of up to 10 years in prison. However, his guilty plea and cooperation led to a reduced sentence. A presentence report from the court’s Probation Office suggested he serve only five months in prison.

There was a significant disparity in sentencing recommendations between the prosecutors and defense lawyers. The DOJ requested a federal judge sentence Zhao to three years in prison, twice the term specified in his plea agreement. In contrast, his defense team argued for no prison time, recommending probation instead.

Zhao’s sentence is notably less severe than the 25-year sentence recently handed down to his former competitor, Sam Bankman-Fried of FTX.

Changpeng Zhao Defense Cites Lack of Precedent and Cooperation

A prosecutor argued  that Zhao avoided incarceration despite deliberately and willfully violating the law to establish the world’s largest crypto exchange and enrich himself in the process. Therefore, they said, no one would go to prison under these circumstances, rendering the Bank Secrecy Act ineffective.

The prosecutor argued  the judge should deduce Zhao’s awareness of illegal activities on Binance, despite the lack of explicit evidence. In contrast, his defense attorneys highlighted the absence of precedent for imprisoning someone under similar circumstances. They cited the government’s case against BitMEX founder Arthur Hayes as an example where the defendant was not incarcerated.

On the other hand, one of Zhao’s defense attorneys emphasized his cooperation with the American government. They told the court this was well-documented and even recognized by the Department of Justice. The court, they argued, should have taken this into account when mitigating Changpeng Zhao’s sentence.

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