US prosecutors have told a court that Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, should serve three years in prison.
The move, made in a court filing on Tuesday, comes after Zhao pleaded guilty to violating laws against money laundering.
Zhao, who is expected to be sentenced on April 30 in Seattle, stepped down as Binance’s chief last November, when he and the exchange admitted to the violations, and the firm agreed to a penalty of $4.32 billion.
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“Given the magnitude of Zhao’s willful violation of US law and its consequences, an above-guidelines sentence of 36 months is warranted,” US prosecutors told the US district court for the western district of Washington.
Federal sentencing guidelines set a maximum sentence of 18 months in prison for Zhao, who had agreed not to appeal against any stretch up to that length. He has been free in the United States on a $175-million bond.
US authorities have said Binance failed to report more than 100,000 suspicious transactions with designated terrorist groups including Hamas, al Qaeda and the Islamic State of Iraq and Syria, or ISIS.
Prosecutors said Binance’s platform also supported the sale of child sexual abuse materials and was a recipient of a large portion of ransomware proceeds.
Zhao, commonly known as CZ, agreed to pay $50 million and cease involvement with Binance, which he founded in 2017.
Binance’s penalty included a $1.81-billion criminal fine and restitution of $2.51 billion.
Binance compliance officer held in Nigeria
Meanwhile, in related news, a Binance executive has been detained in Nigeria since late February amid a dispute with the country’s anti-corruption body and tax officials.
Tigran Gambaryan, a former US law enforcement agent, and a colleague were detained two months ago after being hit with claims the crypto exchange was involved in laundering $35 million.
The other executive, Nadeem Anjarwalla, managed to escape and flee the country last month, but Gambaryan remains in custody while Binance tries to resolve the matter with officials from the Economic and Financial Crimes Commission (EFCC).
In addition to the case brought by the EFCC, Nigeria’s tax agency, the Federal Inland Revenue Service (FIRS), has charged Binance and the executives with tax evasion. That case was due to be heard in court last Friday.
Binance CEO Richard Teng commented on the cases during the Token2049 crypto conference in Dubai last Thursday.
“What I can say is we are working very closely with the Nigerian authorities to try to resolve the matter,” Teng said.
Binance on Thursday also announced it had secured a licence from Dubai’s regulator VARA that will allow the platform to target retail clients in addition to qualified and institutional ones.
The European Union’s securities watchdog said earlier this month that “crypto exchanges largely operate outside of national legal frameworks” and that “Binance, for example, claims to not have a headquarters.”
Asked about the choice of its global headquarters, Teng told Reuters the company had picked a shortlist of potential locations, but declined to comment on specific places or a timeline for definitive decision.
Binance has denied that Gambaryan had any “decision-making power” in the company and said he should not be “held responsible while current discussions are ongoing between Binance and Nigerian government officials.”
“The case also shows how the crypto industry, built on technology that was originally designed to circumvent the global financial system, is still struggling to stay on the right side of law enforcement in countries around the world,” it said, adding that US embassy officials are also closely monitoring Gambaryan’s arrest.
- Reuters with additional input and editing by Jim Pollard
NOTE: Further details were added to this report (on legal cases in Nigeria) on April 24, 2024.
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