The U.S. Department of Justice "changes its mind" or may increase Zhao Changpeng's imprisonment to 3 years? Defense documents reveal a compassionate side

Author: Jordan, PANews

Some content is from: Nikhilesh De, CoinDesk

On April 24, the US Department of Justice stated that Binance founder and former CEO Zhao Changpeng should serve three years (36 months) in prison. The reasoning provided indicates that DOJ lawyers believe Zhao Changpeng helped Binance violate federal sanctions and money laundering laws, asserting that he must pay a greater price, thus suggesting an increase in his sentence.

Given that a US court is set to sentence Zhao Changpeng next week, the sudden proposal by the DOJ to increase the sentence has taken the crypto community by surprise.

Why did the US Department of Justice suddenly "change its mind"?

In November last year, Zhao Changpeng announced his resignation as CEO of Binance, while admitting to violating the US Bank Secrecy Act, pleading guilty to criminal charges related to anti-money laundering and violations of US sanctions, and reaching a settlement with US regulators that involved paying up to $4.3 billion in fines. Of this $4.3 billion fine, $3.4 billion was a settlement with the Financial Crimes Enforcement Network (FinCEN), and $968 million was with the Office of Foreign Assets Control (OFAC). Of the $3.4 billion paid to FinCEN, $2.7 billion was paid to the Commodity Futures Trading Commission (CFTC). (Related reading: The end of the Binance CZ era! Paying $4.3 billion to settle with the DOJ, Richard Teng becomes CEO)

According to the previously disclosed plea agreement terms, after accepting the fine, Zhao Changpeng's imprisonment was expected to be reduced from a maximum of 10 years to no more than 1.5 years (18 months). Therefore, Zhao Changpeng also waived his right to appeal and was released after paying a $175 million bail. His sentencing is expected to take place on April 30. However, the situation seems to have suddenly changed, as the DOJ unexpectedly decided to increase the penalties, arguing in a sentencing memorandum submitted on Tuesday:

"The judgment in this case sends a signal not only to Zhao Changpeng but also to the world that Zhao Changpeng profited immensely by violating US law, and the cost of such illegal behavior must be substantial to effectively punish Zhao's criminal conduct and deter others who attempt to build wealth and business empires through violations of US law. Therefore, we recommend that the court impose a sentence above the guidelines of 36 months imprisonment."

According to the US Department of Justice, part of the reason for the increased sentencing is Zhao Changpeng's failure to implement an effective anti-money laundering program at Binance. Illicit actors exploited Binance's exchange in various ways, including operating mixed services to hide the source and ownership of cryptocurrencies; trading illegal proceeds from ransomware attacks; and transferring proceeds from dark web market transactions, exchange hacks, and various internet-related scams, all of which occurred with Zhao Changpeng's knowledge and even encouragement.

Additionally, Binance failed to report over 100,000 suspicious transactions involving designated terrorist organizations, and prosecutors stated that Binance was the recipient of most ransomware proceeds.

Zhao Changpeng fights back, revealing an unknown side of familial affection

It is reported that just hours after the DOJ submitted its sentencing memorandum, Zhao Changpeng's defense team submitted their own sentencing memorandum, countering the DOJ's claims.

In Zhao Changpeng's sentencing memorandum, his legal team stated that no defendants in similar cases have been sentenced to imprisonment; instead, Zhao Changpeng should be sentenced to probation, which may include house arrest at his home in Abu Dhabi. Binance has over 170 million loyal users worldwide and places great importance on its innovative products and services. Zhao Changpeng deeply regrets his crimes and has shown extraordinary responsibility and remedial measures.

More importantly, Zhao Changpeng's legal team's sentencing memorandum mentioned: "Binance is a non-US company, so the sanctions allegations against Binance are a narrow accusation (the first against Binance). Although the algorithmic matching engine randomly pairs users from sanctioned countries with US users, violating US sanctions laws, these random, automated trades between US users and sanctioned country counterparties account for only a tiny fraction of Binance's total trading volume (0.00041%). Given this, accusing Zhao Changpeng of intentional wrongdoing is quite far-fetched. In fact, Binance has been blocking IP addresses from sanctioned countries."

Notably, the sentencing memorandum also mentioned Zhao Changpeng's supporters, including He Yi, the mother of his three children, his ex-wife Yang Weiqing, their two adult children, former US Senator and current Binance lobbyist Max Baucus, and dozens of others. It specifically pointed out that after transforming Binance into an industry leader in compliance and law enforcement cooperation, Zhao Changpeng voluntarily went to the US to plead guilty and has since remained in the US, away from his hometown and family for more than five months.

According to disclosed information, Zhao Changpeng married Weiqing (Winnie) Yang in 2003, and the couple soon welcomed two children, a son and a daughter. Friends who know Zhao Changpeng recall: "During this time, Zhao Changpeng was a devoted husband and father," while Weiqing (Winnie) Yang stated that Zhao Changpeng provided the utmost care for her and their children, saying: "I still clearly remember that during the infant and toddler stages of our children, Mr. Zhao would be with our children as much as possible, rarely missing any opportunity to personally care for them, such as changing diapers, feeding, and traveling together."

Zhao Changpeng's commitment to his children continued as they grew older, even after he and Weiqing (Winnie) Yang divorced. Zhao Changpeng's eldest daughter stated that although Zhao Changpeng divorced when she was two years old, throughout her upbringing, Zhao Changpeng consistently provided advice and encouragement, and his firm commitment to her healthy growth was very evident.

In 2019, Zhao Changpeng married Yi He and welcomed their first child that same year, soon followed by two more children. Even at the peak of his entrepreneurial success, Zhao Changpeng's care for his family did not diminish, laying the foundation for his life. In 2021, when the cryptocurrency market and trading volume reached historic highs, a friend visited Zhao Changpeng and Yi He in their three-bedroom apartment in Singapore, recalling, "Most of the living area was filled with children's play mats, and toys were scattered everywhere," and remembered that when Zhao Changpeng's youngest son played, "he would turn to his father every few minutes like a clock, and Zhao Changpeng would acknowledge and encourage his youngest son."

Now, Zhao Changpeng's three young children (one of whom is only 9 months old) live in the UAE, and Zhao Changpeng has not seen them since pleading guilty in the US and misses them dearly. Zhao Changpeng's legal team stated in the sentencing memorandum that he has already missed half of his youngest child's life, and "as a loving father, this prolonged separation from his young children has become a part of Zhao Changpeng's life."

Moreover, the legal team emphasized that Zhao Changpeng has paid a hefty fine, has no prior criminal record, and supports charitable causes, thus he should receive a sentence reduction rather than imprisonment.

If all goes as expected, Zhao Changpeng's sentencing will take place on April 30 at the US District Court for the Western District of Seattle. This case has garnered significant attention in the crypto community and highlights the importance of compliance and accountability in the crypto industry. As the market matures, regulatory scrutiny becomes increasingly critical, and high-profile cases like this set a precedent for future crypto enforcement actions.

Previously bankrupt FTX founder SBF was sentenced to 25 years in prison, but unlike SBF, Zhao Changpeng agreed to pay a hefty settlement, so the final outcome is likely to reach a resolution. Meanwhile, Binance's exchange business has not experienced a mass panic exit of funds due to the Zhao Changpeng incident, seemingly providing reassurance to the entire crypto industry. Regardless, the answer will be revealed at the end of this month!