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Changpeng Zhao, the founder and former CEO of Binance, is likely to walk out of prison on Friday after serving a four-month sentence for failing to maintain an effective know-your-customer (KYC) program to fight money laundering on the world’s largest crypto trading platform. And there are still a lot of questions about what he does next.
Zhao is banned from “managing or operating” Binance under his agreement with the U.S. Justice Department, though he still reportedly owns a 90% stake in the company. Zhao was previously making all of the big decisions at the company, but Binance now has a seven-member board.
“I failed here,” Zhao said at his sentencing, according to the Associated Press. “I deeply regret my failure, and I am sorry.”
But Zhao probably doesn’t mind the trade-offs involved in serving just four months while getting to keep so much money for himself. Prosecutors quoted Zhao’s own words in a court filing earlier this year. “Better to ask for forgiveness than permission,” Zhao said, referring to the old adage about doing something risky while knowing you could get in trouble for it.
Binance was fined $4.3 billion as part of its settlement over money laundering charges with the U.S. Department of Justice, the Commodity Futures Trading Commission, and the U.S. Treasury Department. But Zhao paid a fine of just $50 million in conjunction with his jail sentence. Zhao currently has an estimated net worth of about $61 billion, according to Forbes.
Zhao’s prison sentence was officially scheduled to end Sunday, but prison officials can release someone earlier if the day falls on a weekend or a major holiday, as noted by crypto news outlet Decrypt.
Zhao, who founded Binance in 2017, was instrumental in helping bring down convicted fraudster Sam Bankman-Fried, the founder of FTX, albeit it’s unclear if that’s what he had intended to do. It all started when Zhao bought a 20% stake in FTX in 2019. Zhao and Bankman-Fried apparently had a falling out in mid-2021 when FTX was trying to get a license to operate in Gibraltar, and regulators had asked for financial information from shareholders, including Zhao, who refused to provide the information.
This frustrated Bankman-Fried, who bought Zhao out for about $2 billion, which included a lot of FTT tokens, according to Reuters. FTT was a token created by Bankman-Fried, so you can see where this is going. Zhao tried to sell hundreds of millions of dollars worth of FTT, and since it was imaginary internet money, that caused a huge problem since it wasn’t backed by anything real. That’s when everything started to collapse for Bankman-Fried, sending ripples throughout his crypto empire, exposing his massive fraud as people tried to pull out money that simply wasn’t there.
Bankman-Fried is currently serving a 25-year sentence for fraud and conspiracy. Caroline Ellison, another major player in the FTX scandal, was sentenced Tuesday to two years for her role and will be forced to forfeit $11 billion, much more than Zhao had to fork over.
What’s next for Zhao and will he be returning to Binance in any capacity to influence decisions? Current CEO of Binance Richard Teng was asked that question earlier this week on the podcast Altcoin Daily.
“CZ’s a major shareholder,” Teng said. “Those questions are meant for CZ, they’re not meant for me.”
