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United States Binance founder's sentencing hearing
Binance founder Changpeng Zhao will find out today how much jail time he’ll serve for breaking US money laundering laws — if he serves any at all. Prosecutors have requested three years of prison time, double the sentencing guideline of 18 months, because the “scope and ramifications of Zhao’s misconduct were massive,” they wrote in their sentencing memo.
Zhao’s lawyers, in their own sentencing memo, said that Zhao deserved no jail time, as “no defendant in a remotely similar BSA [Bank Secrecy Act] case has ever been sentenced to incarceration.”
Zhao pleaded guilty and stepped down from Binance as part of a settlement with the US Department of Justice in November. Additionally, Binance agreed to pay $4.3 billion in fines. As part of the agreement, Zhao has waived the right to appeal any sentence up to 18 months in prison. He also agreed to pay a fine of $50 million, a drop in the bucket compared to his estimated $33 billion fortune.
According to the US government, Binance knowingly evaded anti-money laundering regulations. As a result, Iranian, Cuban, and Syrian customers were able to transact in violation of US sanctions. Settlements with the CFTC and SEC were announced at the same time as Zhao’s guilty plea.
I’m here in Seattle for the sentencing.
- “Everything I see about your history and characteristics are of a mitigating nature and a positive nature,” says Judge Richard Jones.
The court recognizes that he came voluntarily to the US, has not previously broken laws, and that he took “extraordinary steps and significant steps” in cooperation with law enforcement. But the nature of the events was “aggravating.”
- Zhao is soft-spoken but very clear.
After his brief remarks, he has now stepped down.
- “I’ve had a lot of quiet time alone to think and reflect.”
Zhao says he wants to create a platform for online education for underprivileged kids. “I find this new work extremely rewarding and meaningful.”
- Changpeng Zhao speaks.
Addressing the courtoom before being sentenced, the Binance begins by saying, “I’m sorry,” and says he wants to take responsibility for his “mistakes.” He notes that Binance did implement a KYC/AML program, and that it is cooperating with the US government.
“In my mind, I wanted to do everything possible before stepping down as CEO.”
- Someone took a photo and posted it on Twitter during the hearing.
The judge is annoyed by this.
- And we’re back!
Judge Richard Jones is back on the bench, and we are about to hear from Changpeng Zhao himself.
Gotta say, the government has not exactly covered itself in glory here. If Zhao’s statement is convincing, he might not serve time at all.
- We are taking a recess.
Zhao will speak when we return.
- Because Zhao is a non-citizen, he’s ineligible for a minimum security facility, Burck notes.
And because he’s so well-known as a wealthy man, and because Binance is cooperating with the government, there’s a real risk in being in certain facilities, Burck says.
- We are now discussing “general deterrence.”
Will the sentence deter other people? Government said Zhao should be punished or else there will be a perverse incentive to do what Zhao did. Burck is arguing that prison time will tell people not to come to the US and accept responsibility for their crimes.
- One thing I’ve been wondering...
If the government wanted to put Zhao in jail for serious time, why did they let him plead to something with such a short sentence? It makes me wonder about the matter under seal we keep hearing about.
- “This is unprecedented in terms of volume, scale and massiveness in dollar impact of noncompliance,” says Judge Richard Jones.
He and Burck are having a back-and-forth now about the appropriateness of jail time as recommended by the probation department.
- I do find it curious that defense lawyers keep referring to “a mistake.”
We know from CZ’s messages quoted in multiple court cases that avoiding anti-money laundering controls was not exactly a mistake but a strategy. The language cuts against the idea that CZ is taking “full responsibility” for his misconduct...
- Second reference to “matters that are under seal.”
????
- Burck is by far a better speaker than Bartlett.
He’s making a strong case that the government’s request for three years is way out of line. CZ looks less unhappy listening to his lawyers speak; he’s listening intently, with his eyebrows up.
- A second defense lawyer, William Burck, is now speaking on CZ’s behalf.
“When we read the government’s submission... it read to us like the kind of submission a desperate defendant would write” because it says, essentially, to ignore the sentencing guidelines.
- There is some secret “compelling factor” the court should consider, says CZ’s lawyer.
Some of the filings have been sealed. Wonder what this is!!
- “He never minimized his conduct,” says Mark Bartlett, CZ’s lawyer.
He “admitted his mistake,” Bartlett says, and asks whether there is anything else CZ could possibly have done to show remorse. Bartlett says he can’t think of anything else.
- Defense speaking now.
“When I hear the government discussing the crime here, they don’t seem to be discussing the actual crime,” which is that CZ pleaded guilty to not having an anti-money laundering program. The sanctions violations are irrelevant.
- Probation department is speaking now.
They’re recommending a custodial sentence of 5 months, which they feel is enough to deter defendant and others “without being unnecessarily harsh.” It would be one of the longest sentences for such conduct in this country.
- Changpeng Zhao is not enjoying this.
He’s been listening to Mosely with his eyebrows up, forehead furrowed, at times frowning.
- Judge Richard Jones has a question.
The government’s request is double the top end of the guideline range. Wouldn’t that create a disparity in sentencing? Mosley argues that the disparity is in the magnitude of the conduct, and because CZ is an individual who directed it.
- The recommended guideline sentence isn’t enough of a deterrent because of “the brazenness and magnitude” of Changpeng Zhao’s misconduct, Mosley says.
“An outcome where a defendant makes a plan to violate US law, does so on a massive scale, makes extraordinary amounts of money” and then gets to go home to make money after getting caught means another rational actor might take that chance.
- “Incarceration is necessary to reflect the seriousness of the offense,” Mosley tells the court.
“The brazen nature of this conduct does require a sentence that includes a meaningful period of incarceration.” The scale of this crime is “magnitudes of order” greater than other offenses, Mosley says.
- “This wasn’t a mistake, it wasn’t a regulatory oops,” says Kevin Mosley, the prosecutor.
As a result of asking forgiveness, not permission, Changpeng Zhao made himself a billionaire and celebrity, Mosley says.
- Court finds the defendant has accepted responsibility, says Judge Richard Jones.
We are now going to hear from the government, then probation, then the defense. No one else will speak, as far as we know.
