By AML Intelligence Correspondents
US prosecutors pressed a federal judge on Wednesday to require Binance Holdings founder and former chief Changpeng Zhao to remain in the continental United States before his sentencing hearing on February 23 next.
The U.S. Justice Department on Wednesday urged the judge to require Zhao to stay in the United States and prevent him from returning to the United Arab Emirates before his sentencing. Zhao pleaded guilty on Tuesday to violating U.S. laws to prevent money laundering.
Previously, a DOJ spoksperson told Reuters that Zhao was currently expected to stay in the Seattle area until Monday evening, but after that would be allowed to return to his residency in the UAE.
Legal experts told how they did not expect Zhao to spend more than a year in prison, maybe even less, citing Arthur Hayes, former chief executive of crypto exchange BitMEX, who pleaded guilty to AML violations.
Hayes was ultimately sentenced to six months of house arrest in 2022, even though the government sought prison time beyond guidelines of six to 12 months. Other top-level executives at the firm charged also did not see prison time.
Legal experts told Reuters that based on the alleged facts, prosecutors likely could have charged Zhao with more serious crimes carrying heavier sentences, but had to weigh that against the probability that he would have stayed abroad to avoid capture.
“To get the CEO to plead guilty should not be scoffed at,” said Daniel Silva, a partner at law firm Buchalter and formal federal prosecutor.
Prosecutors will only take a position on how much jail time they seek closer to Zhao’s Feb. 23 sentencing hearing in Seattle, a Justice Department spokesperson said today (Wednesday).
“But we do reserve the right to seek a sentence above the guidelines.”
Zhao agreed to pay a $50 million fine and faces a maximum prison sentence of 18 months under federal guidelines and has agreed not to appeal any sentence up to that length.
Binance did not immediately respond to a request for comment, but said on Tuesday it had worked hard to fix its problems and had become “stronger, safer and even more secure.”
Lawyers for Zhao, who founded Binance in 2017, did not respond to requests for comment on Wednesday. On Tuesday, he only mealy mouthedly conceded, “I made mistakes, and I must take responsibility.”
Binance “turned a blind eye” as it allowed Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda and ISIS to use the platform, Treasury Secretary Janet Yellen said.
Earlier Attorney General Merrick B Garland said of Zhang’s Binance: “Using new technology to break the law does not make you a disruptor. It makes you a criminal.”
Zhao also paid a $175 million bail bond, with another $15 million held in a trust account, a court filing showed. He has agreed to return to the United States from Dubai 14 days before sentencing. Reuters could not immediately ascertain his whereabouts on Wednesday.
Investors pulled about $956 million from crypto exchange Binance over the past 24 hours after its chief, Changpeng Zhao, stepped down and faced prison time after pleading guilty to settle a years-long U.S. illicit finance probe.
The deal, in which Binance will pay $4.3 billion to U.S. authorities, raises questions over the future of the world’s largest crypto exchange and marks another blow for an industry beset by scandals. Zhao has been replaced by Richard Teng, a senior Binance executive who joined in 2021, the company said.
Data from crypto analytics platform Nansen, which does not include bitcoin flows, signaled some investors had been rattled by the news and pulled assets from the exchange. Still, well over $65 billion of assets remain on the platform, according to Nansen.
“Binance has seen significant exchange outflows since the announcement, but relative to their total holdings, it’s quite small,” Nansen analysts said.
By comparison, investors pulled around $1.43 billion from the crypto exchange and its U.S. affiliate in June after the U.S. Securities and Exchange Commission sued the companies.
Among its alleged crimes, Binance failed to report more than 100,000 suspicious transactions including with organizations the U.S. described as terrorist groups – Hamas, al Qaeda and the Islamic State of Iraq and Syria, authorities said.
The exchange also never reported transactions with websites devoted to selling child sexual abuse materials and was one of the largest recipients of ransomware proceeds, they said.
While authorities have probed Zhao and Binance for years, Zhao’s exit marks a dramatic development for one of the most powerful figures in the crypto industry. Zhao, who resides in Dubai, entered his plea in a Seattle court on Tuesday.
However, FTX founder Sam Bankman-Fried could spend decades in prison after being found guilty this month of defrauding customers of his now-bankrupt crypto exchange.
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