Binance, Bank Secrecy and Blockchain: Two Crypto Figureheads convicted of C-broaking and sentencing in the United States

Zhao’s lawyers, in their own sentencing memo, said that Zhao deserved no jail time, as “no defendant in a remotely similar BSA case has ever been sentenced to incarceration.” He traveled to the US to enter his guilty plea. His lawyers wrote that he has been in the US for five and a half months, away from his home, partner and young children. Besides, Binance has taken action to fix their anti-money laundering procedures, they wrote.

Binance allowed sanctions violations of more than $898 million, according to prosecutors, and “violated US law on an unprecedented scale.” Zhao and other Binance executives didn’t comply with US laws, including the Bank Secrecy Act (BSA), and didn’t adequately implement anti-money laundering efforts. As a result, Iranian customers were able to transact at least $1.1 million with US customers in violation of sanctions. Other sanctioned countries, such as Cuba and Syria, were able to transact as well.

Richman says that the judge will be heavily influenced by evidence of Zhao’s disrespect for the law but that his willingness to plead guilty and take responsibility will count in his favor. “When you have somebody who flouted the law in such a sustained way, one could expect that respect for the law will loom large in the sentence the judge imposes,” says Richman.

Zhao is the second crypto figurehead to face criminal sentencing in the US in as many months. Sam Bankman-Fried, also known as SBF, was sentenced to 25 years in prison. They vied for control of the exchange market and sparred frequently before their downfall. But the similarities between the cases end there.

Daniel Richman, a professor of law at Columbia University and former federal prosecutor, said that the judge was required to consider context beyond the facts of the crime in coming to an appropriate sentence. That includes the character of the defendant, the likelihood of recidivism, past infractions, and other factors.

In a letter to the judge in advance of the hearing, Zhao apologized for his conduct and accepted responsibility for the failure to establish an effective compliance program at Binance. He wrote how he regretted his choices that lead to him being before the court. Please accept my assurance that this will be the only time I’ll see the criminal justice system.

“It’s an easy comparison, but an imperfect one,” says Daniel Silva, an attorney at law firm Buchalter and former US prosecutor. “CZ pleaded guilty to not following the law as required of a financial institution executive. The same thing happened to SBF: he was using customer funds, but through fraudulent statements.

In their own presentence filing, Zhao’s counsel made a thinly-veiled reference to the distinction. “Mr. Zhao has been convicted only of an AML [anti-money-laundering] compliance failure,” they wrote. “He has not defrauded any investors, there has been no misappropriation of customer funds.” Their client, they appeared to be saying, is no SBF.

The DOJ secured many landmark crypto convictions until last year, and will celebrate the conviction. “Whether people criticize the sentence as too light, it sends a healthy message,” says Silva. The aim is to “deter the next crypto or financial institution CEO from thumbing their nose at anti-money-laundering regulations.”

Judge Richard Jones, who presided over the sentencing hearing in the Western District of Washington on Tuesday, handed down a lighter sentence than the three years petitioned by the prosecution.