Changpeng Zhao, founder and CEO of Binance, attends the Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition center in Paris on June 16, 2022.
Benoît Tessier | Reuters
U.S. prosecutors are seeking an above-guideline 36-month prison sentence for the former CEO of cryptocurrency exchange Binance for enabling money laundering, according to a sentencing memorandum released Tuesday evening.
The memorandum, which was filed in the Western District Court of Washington, states that Zhao should serve a higher sentence that, according to advisory guidelines, “reflects the seriousness of his crimes.”
Under the advisory guidelines, Zhao’s sentence would be between 12 and 18 months in prison.
“A prison sentence of 36 months, twice the upper limit of the Guidelines range, would reflect the seriousness of the offense, promote compliance with the law, have an adequate deterrent effect and be sufficient, but not beyond what is necessary to achieve the purposes of sentencing.” US prosecutors said.
Zhao is accused of willfully failing to implement an effective anti-money laundering program, as required by the Bank Secrecy Act, and effectively allowing Binance to process transactions involving the product illegal activities, including transactions between Americans and individuals in sanctioned jurisdictions.
Binance was separately sued by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission for alleged mismanagement of customer assets and operating an illegal, unregistered exchange in the United States.
The United States, which separately accuses Binance and Zhao of violating the US Bank Secrecy Act and Iran sanctions, has ordered Binance to pay $4.3 billion in fines and forfeiture. Zhao agreed to pay a $50 million fine.
Zhao resigned as CEO of Binance in November last year after achieving this goal and was replaced by the former head of the Abu Dhabi markets regulator, Richard Teng.
Zhao was not immediately available for comment when contacted via social media platform X. Binance has not yet responded to a request for comment when contacted by CNBC.
“An unprecedented scale” of financial crime
Prosecutors say Zhao violated U.S. law on an “unprecedented scale” and “willfully disregarded” Binance’s legal responsibilities.
In Tuesday’s memorandum, prosecutors said that, under Zhao’s control, Binance operated on a “Wild West” model.
“Zhao bet that he would not get arrested and that if he did, the consequences would not be as serious as the crime,” the memorandum states.
“But Zhao was arrested, and now the court will decide what price Zhao should pay for his crimes.”
Zhao’s formal sentencing is expected to take place on April 30.
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