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Binance CEO CZ’s Continued Legal Troubles in the US

In a DOJ court filing on Saturday night, DOJ lawyers restated that Zhao should be restricted to the Continental US and be barred from leaving. In the document, they underscored that the government could argue for Zhao to be sentenced to ten years in prison, though sentencing guidelines recommend 18 months.

“The defense claims that Mr. Zhao faces merely a “brief” sentence and has no incentive to flee,” states the filing. “The reality is that the top-end of the Guidelines range may be as high as 18 months, and the United States is free to argue for any sentence up to the statutory maximum of ten years. As the defense will certainly emphasize at sentencing, Mr. Zhao has a family and has never spent a day in custody. The penalties he faces at sentencing will no doubt seem significant to him, and that weighs in favor of the reasonable restrictions the United States proposes.”

A federal judge in Seattle declined to let Binance CEO Changpeng Zhao return home to the United Arab Emirates (UAE) before his sentencing on Feb. 23, 2024. Zhao must remain in the US–at least for now. 

Zhao’s lawyers had requested their client be allowed to return home, arguing that Zhao “voluntarily flew” to the U.S. to enter a guilty plea. But, UAE does not have a formal extradition treaty with the U.S, and the government doesn’t want to take a chance. Richard A. Jones, a U.S. District Court Judge in Seattle, ruled that Zhao cannot return “until such time as this court resolves the Government’s motion for review.”

The government laid out its case: “In the vast majority of cases, a multi-billionaire defendant who has pleaded guilty, faces possible prison time, and lives in a country that does not extradite its citizens to the United States would be detained.”

Prosecutors argued they already made an “exceptional recommendation” to not take Zhao into custody ahead of sentencing. Zhao, they argue, represents a flight risk, but one that “could be managed by requiring him to remain in the U.S. and preventing him from returning to the safe haven of the UAE.”

Zhao and others were charged with violating the Bank Secrecy Act by failing to implement an effective anti-money laundering program and for willfully violating U.S. economic sanctions “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law,” according to the Justice Department.

The $4.3 billion dollar plea deal is the largest penalty in US Treasury and FinCEN history. “This gargantuan settlement reflects the egregious nature of Binance’s conduct, the high volume of its transactions, and the intensity of senior management’s involvement,” wrote John Reed Stark on Twitter.

https://t.co/qj7QwQUTuB

Zhao has faced numerous challenges and controversies that ultimately led to his downfall. One early and significant controversy was the accusation of insider trading. Critics alleged that Binance manipulated the markets by allowing privileged traders early access to new listings.

This scandal eroded trust in Binance’s integrity and raised concerns about its compliance with regulatory standards. The most recent plea deal only helps to confirm such suspicions.                                                                                        

Binance failed to implement programs to prevent and report suspicious transactions with terrorists, including Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda, and the Islamic State of Iraq and Syria (ISIS), ransomware attackers, money launders, and other criminals, as well as facilitating trades between U.S.-based users and those in sanctioned jurisdictions such as Iran, North Korea, Syria, and Crimea region of Ukraine. As the DoJ writes: in its filing: 

“Mr. Zhao has no ties to the United States. His family lives in the UAE and he holds his wealth and property abroad, including in the UAE. Mr. Zhao is not simply a citizen of the UAE, but has favored status there, having obtained citizenship by invitation,” reads the filing. “While Mr. Zhao characterizes this invitation and citizenship as an “honor” that he would not leverage to avoid U.S. law, it demonstrates his strong connections to the UAE. Given these connections, should Mr. Zhao decide not to return to the United States to face an uncertain sentence, there is no reason to believe that the UAE would hand him over.”

Clearly, the DoJ wants Zhao in the US. Perhaps the agency suspects that ongoing monitoring of Binance or other plea deal requirements could reveal further chargeable crimes, and don’t want to miss their chance with Zhao already in the US for the plea.

Read Also: What Do Binance’s $4.3B Fine and CZ’s Resignation Signal for Crypto?

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