After SBF, will Zhao Changpeng also be imprisoned?
Even if Zhao Changpeng is sentenced to prison, those hoping for a reunion between the Binance CEO and his former arch-rival SBF may be disappointed.Original Title: Will Binance Founder Changpeng Zhao Go to Prison?
Author: Sander Lutz, Decrypt
Translation: bayemon.eth, ChainCatcher
A few weeks ago, a Manhattan jury found FTX founder SBF (Sam Bankman-Fried) guilty of seven counts of fraud and conspiracy, a ruling that could see the fallen Silicon Valley darling spend the rest of his life in a brutal federal prison. SBF's long-time rival, Changpeng Zhao (CZ), also announced today that he has reached a settlement with federal prosecutors, admitting to violating U.S. anti-money laundering criminal laws and stepping down as CEO of Binance. Now, what once seemed unimaginable has suddenly become a reality: are the two richest people in cryptocurrency about to become cellmates?
Earlier today, a federal judge in Seattle accepted Changpeng Zhao's guilty plea. While the final ruling still rests with this judge, certain historical precedents and sentencing factors suggest we may not have a hard time glimpsing the fate changes for this cryptocurrency billionaire in the coming years.
The Bank Secrecy Act requires financial institutions to take certain measures to prevent and detect money laundering activities, with a maximum prison sentence of five years for violations of this law. Theoretically, by admitting to violating this law today, Changpeng Zhao could face five years in a U.S. federal prison, but several signs indicate he may not receive the maximum penalty.
First, as one of the conditions for "reduction of sentence," while being able to retain a majority stake in Binance, Zhao must step down as CEO and can never again hold an executive position at Binance.
This concession from the Justice Department indicates that federal agencies are willing to at least partially meet Zhao's demands in order to reach a historic settlement with Binance. While federal prosecutors cannot ultimately decide whether Zhao faces prison time or how long he must spend behind bars, they do have the ability to lobby the judge on sentencing issues.
Despite sources from the Justice Department telling The New York Times on Tuesday that the agency would seek an 18-month prison sentence for Zhao, this does not guarantee that the Binance co-founder will be incarcerated. In past similar criminal cases involving cryptocurrency and money laundering, prosecutors have sought harsh sentences but have been denied.
For example, last year, in a case that bore significant similarities to Zhao's, cryptocurrency executive Arthur Hayes admitted to violating the Bank Secrecy Act while leading the well-known cryptocurrency exchange BitMEX. The probation officer recommended no prison time for Hayes, suggesting two years of probation, partly because the cryptocurrency executive had no prior criminal record, but the prosecution strongly opposed this, asking the judge to reject the recommendation and impose a lengthy prison sentence on Hayes.
The judge ultimately ignored the prosecution's request, sentencing Hayes to six months in prison and two years of probation.
Like Hayes, Zhao has no prior criminal record and has agreed to pay a $50 million fine (Hayes had agreed to pay $10 million at the time).
This suggests that Zhao may face a similar sentencing outcome—potentially including probation and possibly a short prison term.
Of course, this Binance co-founder has made it clear in public statements that he does not intend to experience prison life. On Tuesday afternoon, Zhao posted on Twitter that he plans to take a vacation in the coming months to "make some passive investments" in blockchain, DeFi, AI, and biotech startups, and may mentor some developing entrepreneurs. Wearing an orange jumpsuit is not part of these plans.
However, even if Zhao is sentenced to prison, those hoping for a reunion between the Binance CEO and his former arch-rival SBF may be disappointed.
According to legal advisor Christopher Zoukis, criminals sentenced to 10 years or less in federal prison are placed in minimum-security facilities, which house non-violent offenders in dormitory-style accommodations and provide a relatively decent quality of life. Even if Zhao receives the worst possible sentence, he is likely to be sent there.
In contrast, SBF will be serving decades in a medium-security federal prison, where gang-related extreme violence is commonplace, and inmates are housed in highly secured cells.
