Changpeng Zhao, the former CEO of Binance, has been ordered to remain in the US until his sentencing hearing in February after pleading guilty to violating US anti-money laundering laws. What does this mean for the crypto giant and its founder?
Changpeng Zhao, also known as CZ, the founder and former CEO of Binance, the world’s largest cryptocurrency exchange, is facing a possible prison sentence in the US after admitting to breaking US anti-money laundering laws.
CZ, who stepped down from his role at Binance last week, has been denied permission to return to his home in the United Arab Emirates (UAE) by a US judge, who said he would review his request closer to his sentencing hearing in February.
CZ’s Guilty Plea and Bail Package
The Ex-CEO pleaded guilty on November 21, 2023, to willfully causing Binance to fail to maintain an effective anti-money laundering program. This felony charge carries a maximum penalty of 18 months in prison.
He appeared in a Seattle federal court via video conference to enter his plea.
As part of his plea agreement, CZ agreed to pay a $50 million fine to the Commodity Futures Trading Commission (CFTC) and to cooperate with the US authorities in their ongoing investigations into Binance and other crypto-related entities.
He also agreed not to make any statements contradicting his acceptance of responsibility or challenging the factual basis of his plea.
CZ, who is a citizen of Canada and the UAE, was released on a “substantial” bail package, which included surrendering his passports, posting a $10 million bond, wearing a GPS ankle monitor, and staying at a hotel in Seattle under 24-hour security.
He also agreed to travel restrictions that limited his movements to the Western District of Washington and the Southern District of New York.
US Judge’s Ruling and Government’s Appeal
CZ’s lawyers had requested that he be allowed to return to the UAE before his sentencing hearing, which is scheduled for February 23, 2024.
They argued that he was not a flight risk, as he had voluntarily come to the US to face the charges and had complied with all the conditions of his release. They also claimed that he had strong ties to the UAE, where he had lived since 2018 and where his wife and children resided.
However, the US government opposed CZ’s request, saying that it may be unable to secure his return to the US if he left the country, given that the US has no extradition treaty with the UAE.
The government also cited CZ’s history of evading US regulations and authorities, his access to significant financial resources, and his influence in the crypto industry.
On November 27, 2023, US District Judge Richard Jones in Seattle granted CZ’s request to return to the UAE, subject to certain conditions, such as obtaining approval from the UAE government, providing a detailed travel itinerary, and appearing for his sentencing hearing in person or via video conference.
Judge Jones said he was satisfied that CZ had shown “by clear and convincing evidence” that he was not likely to flee or pose a danger to the community.
However, on November 27, 2023, the US government filed an appeal against Judge Jones’ ruling, asking the US Court of Appeals for the Ninth Circuit to stay the order and prevent CZ from leaving the US.
The government argued that Judge Jones had abused his discretion and that CZ’s release to the UAE would pose an “unacceptable risk” of non-appearance.
On the same day, Judge Jones issued an order staying his own ruling pending the resolution of the government’s appeal. He said he would review whether CZ should remain in the US until his February sentencing hearing.
Binance’s Settlement and Future
Binance, which was founded by CZ in 2017 and has grown to become the world’s largest crypto exchange by trading volume, also pleaded guilty to three criminal charges, including conducting an unlicensed money-transmitting business, conspiring to violate the International Emergency Economic Powers Act, and violating the Bank Secrecy Act.
The crypto exchange company agreed to pay over $4.3 billion in fines and forfeitures to various US agencies, including the Department of Justice, the CFTC, the Treasury Department’s Financial Crimes Enforcement Network, and the Office of Foreign Assets Control.
Binance also agreed to accept the appointment of a monitor and to implement remedial measures to comply with US laws and regulations.
The settlement with Binance is the largest corporate resolution in US history involving crypto-related crimes.
It marks the culmination of a multi-year investigation by the US authorities into Binance’s operations and practices, which allegedly involved facilitating transactions for sanctioned individuals and entities, failing to report suspicious activities, and evading US jurisdiction and oversight.
Binance’s new CEO, Richard Teng, who replaced CZ last week, said in a statement that the company accepted full responsibility for its past actions and was committed to working with the US authorities and regulators to build a more compliant and sustainable crypto ecosystem.
He also said that Binance would continue to serve its customers and partners around the world while enhancing its products and services to meet the highest standards of security, transparency, and ethics.
