According to a recent court filing, it appears that Changpeng “CZ” Zhao’s legal troubles are not over, despite his admission of guilt and settlement with the U.S. Department of Justice (DOJ) for violating Anti-Money Laundering regulations. Zhao is scheduled to be sentenced in February 2024 and is currently contesting the government’s attempts to prevent him from returning to the United Arab Emirates while awaiting sentencing with his family. However, in a filing on November 24, authorities indicated that he may face a more severe punishment than initially expected.
The defense argues that Zhao will only receive a short sentence and has no reason to flee. However, the reality is that the maximum sentence under the Guidelines could be as long as 18 months, and the United States has the discretion to argue for a sentence of up to ten years, which is the statutory maximum. This potential for a longer sentence contradicts the consensus among legal experts. According to analysis by former U.S. Securities and Exchange Commission official John Reed Stark, Zhao could receive a minimum-security prison sentence of 12-18 months under U.S. sentencing guidelines. While Zhao’s legal team will likely request no jail time or an alternative sentence, there is a possibility of a combination of prison time, home detention, and probation.
Zhao’s significance in the cryptocurrency industry might also have an impact on his destiny. Stark holds the belief that if the Department of Justice (DOJ) fails to obtain a sentence for CZ that discourages future instances of money laundering in the cryptocurrency world and beyond, then this “plea deal” could have unintended consequences for the DOJ.
However, seeking a lengthier imprisonment term for Zhao may not be a straightforward task for the DOJ. According to Stark’s analysis, government officials would need to present stronger evidence linking him to illicit actions.
Zhao has been released on a $175 million bond, which requires him to return to the U.S. 14 days prior to his sentencing date on February 24, 2024. Stark, in his remarks, stated that Judge Richard Jones is anticipated to review the government’s motion on November 27, possibly strengthening the bail requirements by imposing additional bond conditions or delaying a decision.
The legal and business communities are engaged in a heated debate regarding the Binance/CZ case. Omid Malekan, an author and adjunct professor at Columbia Business School, highlights that the Department of Justice’s approach to the exchange differs significantly from the practices observed in traditional finance. Malekan suggests that if banks were subjected to the same standards as Binance, numerous managing directors would be in jail, and there would be less money available for shareholder buybacks or lobbying. However, he acknowledges that the bankers were astute enough to never question the system.
On November 21, Zhao reached a settlement of $4.3 billion with the U.S. government over allegations of enabling individuals involved in illicit activities to transfer funds through the exchange. As part of the settlement agreement, he resigned as CEO.