Former Binance CEO Changpeng Zhao, widely known as CZ, has been sentenced to four months in prison following a sentencing hearing in Seattle. The judge deemed the sentence as “appropriate” and “reasonable,” stating that Zhao had the personnel and resources to comply with US laws but failed to do so.

With a net worth of $33B, Zhao is set to become the richest US inmate ever. During the hearing, Judge Richard Jones disagreed with the Department of Justice’s (DOJ) request for a three-year sentence, citing lack of evidence that Zhao was informed of the exchange’s illegal activities.

DOJ’s Argument Against Probation for Binance CZ

However, the DOJ argued that Binance’s violation of US laws was “integral” to its business model, and failure to punish Zhao with incarceration would undermine the Bank Secrecy Act (BSA). They highlighted that Binance and its former boss only tightened compliance rules after being caught, which, according to the DOJ, did not warrant probation.

Earlier, Binance crypto exchange agreed to exit the entire U.S. market as part of the settlement agreement. Moreover, CZ agreed to pay a $50M fine in personal capacity and to stay out of Binance operations for at least three years. He pleaded guilty to anti-money laundering violations.

CZ’s Defense and DOJ’s Accusations Highlight Regulatory Challenges

Zhao’s defense attorney referenced the case of former BitMEX CEO Arthur Hayes to argue against incarceration. In his defense, Zhao admitted to failing to establish a KYC/AML program but claimed that he later directed Binance to cooperate with the government.

US Justice Department officials accused Zhao of fostering a company culture prioritizing Binance’s growth over compliance with US financial rules. They claimed that Binance’s lax controls allowed funds linked to virtual theft and terrorism to flow undetected, emphasizing the need for stricter enforcement.

The sentencing marks a significant development in the ongoing regulatory scrutiny faced by cryptocurrency exchanges and their executives.