.svg)
US prosecutors call for an above-guideline sentence for Changpeng Zhao, the creator of TerraUSD could be looking at a record-breaking fine, and two suspects are indicted for operating a virtual currency mixer.
The founder and former CEO of Binance should be sentenced to three years in prison following his conviction for violating the Bank Secrecy Act, US prosecutors have said.
Changpeng Zhao, 47, received the news this week in a sentencing memorandum signed by attorneys representing the Department of Justice (DOJ).
In addition to a 36-month prison sentence, the DOJ recommended that the crypto billionaire be issued a $50m fine.
“Zhao’s willful violation of US law was no accident or oversight,” said the lawyers representing the US. “He made a business decision that violating US law was the best way to attract users, build his company and line his pockets.”
The DOJ said the sentencing in this case must “send a message” not only to Zhao but also to the wider crypto industry, including to firms operating outside the US.
“Zhao reaped vast rewards for his violation of US law, and the price of that violation must be significant,” they said. The sentence should “effectively punish” Zhao for his criminality and should deter others who are “tempted to build fortunes and business empires” by breaking US law.
Responding to the recommendation in a statement submitted to court one day later, Zhao said that “words cannot explain” how deeply he regrets his actions.
“I apologize for my poor decisions and accept full responsibility,” he said. “In hindsight, I should have focused on implementing compliance changes at Binance from the get-go, and I did not. There is no excuse for my failure.”
The former CEO said he was drawn to crypto for the “inclusiveness” and “equal opportunity” it represents, adding that his mission was always to deliver financial freedom to the world.
In his life beyond crypto, Zhao said he will focus on helping underprivileged youth in Africa and Southeast Asia, while also giving to charity and contributing to blockchain education.
“Please accept my assurance that this will be my only encounter with the criminal justice system, and that going forward I will live my life in a manner that will make everyone proud,” he said.
Zhao’s counsel also submitted about 350 pages of supporting testimony from his family, friends and associates.
The list of personalities who wrote to the court to urge leniency for Zhao includes royalty, diplomats, former politicians and fellow crypto professionals.
Max Baucus, former US senator and former ambassador to China who now serves on Binance’s advisory board, described Zhao as “one of the most decent persons I have known”.
Many of the supporting statements attest to Zhao’s “remorse”, “personal growth” and “charitable works”, while others emphasise that Zhao is a humble person who eschews luxuries.
“Mr. Zhao, who lives near my home, often dresses in basic clothing purchased from Amazon or wears his Binance merchandise,” said Gabriel Abed, former ambassador of Barbados to the UAE.
“Additionally, he drives a Toyota and dons an Apple watch, and these are just a few examples of his minimal regard for material possessions.”
He Yi, Zhao’s partner and mother of his three children, also noted that he buys clothes from Amazon, as did Kan Weiyang Alvin, COO of Bitget Wallet.
Large fine looms for Do Kwon
When the DOJ announced its plea agreement with Zhao and Binance in November last year, it also issued a $4.3bn fine to Binance’s corporate defendants.
It was the largest fine in US history, but it could soon be surpassed by an upcoming fine that will be issued to Do Hyeong Kwon, 32, creator of the TerraUSD stablecoin.
In the past week, the Securities and Exchange Commission (SEC) has submitted a recommendation for Do Kwon to pay $5.3bn in fines after being found liable for securities fraud.
The SEC requested that Do Kwon and Terraform Labs, his former company, pay $4.74bn in disgorgement and prejudgment interest, in addition to $520m in civil penalties.
Terraform Labs should cover $420m of the civil penalties, the regulator said, while Do Kwon should cover the remaining $100m.
Earlier this month, a New York jury found Do Kwon and Terraform Labs liable for “intentionally and recklessly” orchestrating one of the largest securities frauds in US history.
The collapse of the TerraUSD stablecoin in May 2022 erased almost $40bn in market value almost overnight, while Do Kwon and Terraform are believed to have made more than $4bn in ill-gotten gains.
“The court should send an unequivocal message that this sort of brazen misconduct will not be tolerated,” said the SEC.
Founders of crypto mixing service indicted
Finally, the DOJ has arrested and charged the two founders of a crypto mixing service known as Samourai Wallet.
In an indictment published this week, the DOJ said that Samourai has been used to facilitate more than $2bn in unlawful transactions and has laundered at least $100m in criminal proceeds.
Keonne Rodriguez, 35, co-founder and CEO of Samourai, was arrested in Pennsylvania, while William Hill, 65, co-founder and CTO of Samourai, was arrested in Portugal.
Both are US nationals and both have been charged with one count of conspiracy to commit money laundering and one count of conspiracy to operate an unlicensed money transmitting business.
Each of these charges carries a maximum sentence of 20 and five years in prison respectively.
