6 months ago
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Binance founder and former CEO Changpeng “CZ” Zhao was sentenced to four months in federal prison on Tuesday, first reported by the Associated Press. Zhao pleaded guilty to money laundering violations as part of Binance’s agreement with the United States Department of Justice, allowing the company to settle legal troubles and continue operating under a new CEO.
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“Better to ask for forgiveness than permission,” reads the opening line of the prosecution’s court filing last week, quoting Zhao’s alleged statement to Binance employees about complying with U.S. laws. “He ran Binance with deliberate disregard for the company’s legal responsibilities and for its capacity to cause significant harm, and because of his conduct, Binance processed millions of dollars of unlawful proceeds.”
Zhao is the second crypto executive to receive jail time in 2024, joining the founder of FTX Sam Bankman Fried, although CZ’s situation is less gloomy. While FTX pulls itself out of bankruptcy and SBF settles in for a 25-year sentence, Binance and CZ are expected to grow their fortunes during the prison sentence.
Binance’s assets have grown significantly under this latest crypto boom, Bloomberg reports. Though Zhao is no longer a CEO, he still has a 90% stake in the company, according to Forbes, which estimates his net worth at $33 billion. The co-founder of Binance and mother of Zhao’s three children, Yi He, has reportedly picked up the slack running the crypto exchange.
In November 2023, Binance reached an agreement with the United States Department of Justice acknowledging the company’s “responsibility for historical, criminal compliance violations” in a statement. This ended a years-long investigation into the company, as U.S. prosecutors forced Binance to pay $4.3 billion, and Zhao to submit a $50 million penalty and his resignation as CEO.
Binance was founded in 2017 by Zhao, quickly becoming the world’s largest cryptocurrency exchange a year later. However, prosecutors alleged that Binance’s lack of safeguards enabled criminals to transmit millions of dollars through the platform.
An intense legal battle broke out between U.S. regulators and Binance in the last few years. Zhao claimed his crypto exchange was a global company and that the U.S. law “does not control the world.” However, prosecutors made the argument that Binance specifically targeted America’s lucrative customer base while ignoring American laws.
Zhao is already planning his future ventures after his four months in prison are up. The New York Times reports that CZ texted OpenAI CEO Sam Altman in late 2023 about the startup world. Seemingly unrelated, the billionaire tweeted last month that his next project is called Giggle Academy, a K-12 digital education program that claims to be “free and available to all” on its website.
A concept paper for Giggle Academy reveals it aims to gamify education by “making learning addictive.” The project describes itself as a completely online, zero-revenue platform, which hopes to provide access to underprivileged kids in developing countries. The paper lists Giggle Academy’s funding source in a single sentence: “This project is funded by CZ.”
The punishments for CZ’s crimes are pretty minimal, relative to what happened to FTX and Sam Bankman-Fried. CZ is paying a financial penalty that ultimately amounts to a slap on the rest for the multi-billionaire. He still gets to reap the rewards of the business he started, but he will become the richest person to serve time in a US federal prison. After the four-month sentence, CZ seems like he’ll be back in the world doing tech billionaire things.
