In a significant development for the cryptocurrency industry, Changpeng Zhao, the founder of Binance, has been sentenced to four months in prison for failing to establish adequate anti-money laundering (AML) protections. Zhao, once at the helm of the world's largest crypto exchange, had pleaded guilty to the charges in November 2023.

Judge Richard Jones, presiding over the case, criticized Zhao for prioritizing Binance's growth and profits over compliance with US laws and regulations. While acknowledging that Zhao is unlikely to reoffend, Judge Jones emphasized the sizeable scale of the crime, stating that Binance had "violated US law on an unprecedented scale."

Although not as well-known as FTX's Sam Bankman-Fried, Zhao is considered a more influential figure in the crypto world. The Chinese-Canadian entrepreneur founded Binance in 2017 and, despite stepping down as CEO as part of his plea agreement, he remains the majority shareholder, which some have referred to as a "massive shitcoin casino."

Prosecutors had initially sought a three-year prison sentence for Zhao, double the recommended guideline of 18 months. They argued that Zhao's misconduct had far-reaching ramifications and highlighted the significant harm caused to US national security as a result of his criminal acts.

According to the prosecutors, Binance allowed sanctions violations totaling over $898 million and failed to comply with US laws, including the Bank Secrecy Act (BSA). The exchange also inadequately implemented anti-money laundering measures, resulting in Iranian customers transacting at least $1.1 million with US customers, in violation of sanctions. Other sanctioned countries, such as Cuba and Syria, were also able to conduct transactions on the platform.

In the defense's sentencing memorandum, Zhao's lawyers contended that no other defendant in a similar BSA case had ever received a prison sentence. Additionally, they highlighted Zhao's cooperation and the changes made by Binance to rectify their AML procedures.

Known for his cavalier attitude towards US laws, Zhao's confrontations with FTX's CEO, Sam Bankman-Fried, have been noted in the industry. Zhao's public announcement of selling his FTX holdings had a significant impact on the rival exchange, eventually leading to the discovery of fraud within FTX. Bankman-Fried was subsequently sentenced to 25 years in prison in March following a jury trial.

As part of his plea agreement, Zhao has agreed to pay a fine of $50 million, a relatively small amount compared to his estimated $33 billion fortune amassed through Binance. Furthermore, he has committed not to appeal any sentence up to 18 months.

The sentencing of Binance's founder underscores the growing regulatory scrutiny faced by cryptocurrency exchanges and the urgent need for robust compliance measures within the industry.