Changpeng Zhao’s Four-Month Sentence Sends A Clear Warning To The Cryptoverse — No More Wild West

After months of legal back-and-forth, Binance’s founder, Changpeng Zhao, received a four-month sentence for anti-money laundering violations. Pundits claimed that the sentence was a “clear warning” to the rest of the industry to comply with anti-money laundering rules.

Aaron Lane, a law professor at Melbourne’s RMIT Blockchain Innovation Hub, disclosed that the case’s conclusion serves as a “general deterrence” to virtual asset service providers in the ecosystem. Lane added that in the future, cryptocurrencies will not be seen as the Wild West by executives and all classes of investors.

“General deterrence appears to be the main rationale behind the term of imprisonment,” said Lane. “The judge has sent a message, not to CZ individually but to the entire industry, that Anti-Money Laundering compliance must be taken seriously.”

Despite the four-month sentence, a cross-section of the industry says the embattled founder received a slap on the wrist for charges bordering on money laundering. Sentencing guidelines after pleading guilty prescribe 18 months, with prosecutors pushing for a hard three-year sentence for Zhao.

The judge justified the four-month sentence as within his discretion, noting that Zhao had accepted a guilty plea, stepped down from his role as Binance CEO, and paid a $50 million fine.

US authorities have previously taken down another industry behemoth in April, securing a 25-year prison sentence for FTX founder Sam Bankman-Fried for fraud, a move that sent ripples through the industry.

Apart from Zhao and SBF, several crypto executives have their heads on the chopping block as regulators continue to seek tighter controls for the space. Terraform Labs co-founder Do Kwon continues to face fraud charges by US authorities after months as a fugitive. At the same time, Celsius Network CEO Alex Mashinsky has a score to settle with prosecutors in the US.

As we advance, service providers in the industry are expected to comply with existing anti-money laundering rules and Know Your Customers (KYC) processes or face enforcement actions from the US Securities and Exchange Commission (SEC) and the Department of Justice.

Accepting the sentence

The embattled founder announced his intention to serve his time in jail, announcing on X that he would maintain a passive stance toward the industry. Zhao noted that he would focus on his blockchain-based education project while assuring Binance users that all funds were safe.

“Our industry has entered a new phase. Compliance is super important,” wrote Zhao. “A silver lining of this whole process is that Binance has been under the microscope. And funds are SAFU.”

However, the SEC continues to hover in the shadows, probing for evidence of misappropriation of customers’ funds by Binance.US, but executives continue to deny any wrongdoing.