The U.S. Department of Justice is advocating for a three-year prison sentence for Changpeng “CZ” Zhao, the founder and former CEO of Binance, due to his involvement in facilitating the exchange’s violations of federal sanctions and money laundering laws. This recommendation follows Zhao’s guilty plea last November for breaching the Bank Secrecy Act, with the DOJ also proposing a $50 million fine. Zhao’s defense contends he should avoid incarceration, highlighting his payment of fines and acknowledgment of responsibility. They propose probation, possibly with home confinement in Abu Dhabi.

The DOJ stresses the significance of Zhao’s punishment as a deterrent against others exploiting U.S. law for personal gain. They argue that Zhao’s actions enabled various illicit activities on Binance, including concealing cryptocurrency origins, laundering ransomware proceeds, and facilitating darknet market transactions. Despite Zhao’s plea agreement suggesting up to 18 months’ imprisonment, the DOJ asserts that the scale of his misconduct warrants a longer sentence.

Additionally, the DOJ criticizes Binance’s lax anti-money laundering (AML) measures, attributing the platform’s exploitation by criminal elements partly to Zhao’s failure to implement effective AML protocols. They emphasize how Zhao’s knowledge of and encouragement for Binance’s illegal activities further justify the recommended sentence.

Zhao’s defense rebuts these claims, asserting his lack of direct involvement in specific criminal transactions on Binance. They argue that the sanctions violation charge against Binance was novel and that Zhao’s actions were unintentional, given the minuscule proportion of illicit transactions compared to overall trading volume. The defense also emphasizes Zhao’s low risk of repeating offenses and highlights support from various individuals, including family members and a former U.S. senator turned Binance lobbyist.

Notably, Zhao’s sentencing, originally scheduled for late February, was postponed to April 30. Meanwhile, Binance, alongside Zhao, faced significant penalties, including a $4.3 billion fine and court-appointed monitoring, highlighting the broader regulatory scrutiny facing cryptocurrency exchanges.

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