Crypto Community Stands By Ex Binance CEO CZ Ahead of Imprisonment

Changpeng Zhao, known widely as CZ, has begun serving his prison sentence at a low-security federal prison in Lompoc, California. This development marks a significant moment for the cryptocurrency community, which has shown strong support for the former CEO of Binance, the world’s largest cryptocurrency exchange . The confirmation of his imprisonment came through his legal team at Latham and Watkins.

The reaction from the crypto community has been largely positive. Many members see Zhao’s decision to serve his sentence as a strategic move to protect Binance from potential fallout. One user on Reddit expressed that CZ’s actions are crucial in maintaining the stability of Binance, especially considering the negative impact that the collapse of FTX had on the crypto industry. The user noted that Zhao’s plea and resignation were necessary steps to ensure Binance’s continuity and prevent a similar catastrophe.

Zhao has also shared his plans for after his release, indicating a strong intention to remain active in the cryptocurrency world. He plans to maintain his current crypto holdings and engage in passive investing, signaling his ongoing confidence in the market. Zhao views this period as an important phase for the cryptocurrency sector, emphasizing the need for adherence to regulations and rules.

In April, Zhao was sentenced to four months in prison by Judge Richard Jones in the U.S. District Court for the Western District of Washington. The charges against him were related to money laundering activities at Binance. Alongside the prison term, he was ordered to pay a $50 million fine. This sentence was notably lighter than the three years recommended by federal prosecutors, reflecting a significant reduction from the original sentencing guidelines, which suggested a term of 12 to 18 months. Zhao’s legal team had requested a sentence of five months of probation instead.

Before receiving his sentence, Zhao made a public apology, acknowledging his failure to implement an effective Anti-Money Laundering (AML) program at Binance. He expressed regret for his actions and took full responsibility, highlighting that he had spent considerable time reflecting on his mistakes.

In November, Zhao reached a settlement with the U.S. government to resolve a long-standing investigation into Binance. As part of this agreement, he stepped down from his role as CEO. This settlement included a substantial financial penalty, with the U.S. government ordering Binance to pay $4.3 billion in fines and forfeitures. Zhao personally agreed to pay an additional $50 million fine.

Despite no longer being at the helm of Binance, Zhao remains a significant figure in the company, reportedly holding an estimated 90% stake. His involvement in the company and the broader crypto community is likely to continue post-imprisonment, given his stated plans and ongoing support from various quarters.

The scope of Zhao’s alleged misconduct involved knowingly failing to establish a robust AML program as mandated by the Bank Secrecy Act. This failure allowed Binance to process transactions that included proceeds from illegal activities, including transactions involving individuals in jurisdictions under sanctions. This lack of compliance led to the significant fines and penalties imposed on both Zhao and Binance.

The cryptocurrency community’s support for Zhao contrasts sharply with the fate of another prominent figure in the industry, Sam Bankman-Fried, the founder of FTX. Bankman-Fried is currently serving a much longer prison sentence of 25 years for securities fraud and related offenses. Unlike Zhao, Bankman-Fried did not reach a settlement with the government and faced a more severe outcome, largely due to the extensive cooperation of his former associates with the prosecutors.

Among those who wrote in support was Zhao’s sister, Jessica Zhao, who emphasized her brother’s commitment to ethical conduct, citing his efforts to ensure Binance never misused customer funds during the fallout of FTX. He Yi, another co-founder of Binance and the mother of Zhao’s three children, described Zhao as a guardian of the cryptocurrency sector, underscoring his dedication despite the lack of clear regulatory frameworks.