Binance's Changpeng Zhao Could Be Detained In The US, Spend A Decade In Jail

Former Binance CEO Changpeng Zhao, or CZ, as he is more popularly known in the crypto space, could be detained in the U.S. and spend up to ten years behind bars based on a recent court filing.

Zhao and the crypto exchange he founded, Binance, pleaded guilty to the U.S. Department of Justice's charge of one count of violating the Bank Secrecy Act.

The charge stemmed from the involvement of the crypto exchange platform in a global criminal enterprise, as alleged by the DOJ, to which, Binance, as part of the settlement deal, paid the historic $4.3 billion fine and, going forward, agreed to adhere to the regulatory compliance and requirements by the regulators and government agencies.

Legal experts had initially believed that based on the U.S. Sentencing Guidelines, Zhao would likely get a 12-18 month sentence at a minimum security prison. If that was the case, his legal team would have appealed for no jail time or a much lighter sentence.

But, this might totally change based on the Saturday night court filing by DOJ lawyers, who pushed for their earlier argument that Zhao should be restricted from living in the U.S. and prohibited from returning to his home in the United Arab Emirates.

The government's lawyers also disclosed that at Zhao's sentencing, they might argue that the Binance founder and former CEO should be sentenced to up to ten years in prison.

"The defense claims that Mr. Zhao faces merely a "brief" sentence and has no incentive to flee. 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," the filing read.

Former SEC Office of Internet Enforcement chief John Reed Stark said over the weekend that Richard A. Jones, the judge presiding Zhao's case, "should prohibit CZ from traveling to the UAE until the sentencing hearing," and added that for him, Zhao's crimes "are not regulatory parking tickets but are tantamount to mass murder and mayhem, and his wealth and special citizenship in a non-extraditing country render CZ a legitimate flight risk."

The Senior Lecturing Fellow at Duke University School of Law also opined he "would not be surprised if CZ fails to cooperate, violates his plea conditions (which include a litany of restrictions and a 3-year ban from associating with Binance) or takes some other action to blow up his plea arrangement."

"But most importantly, the stark reality is that if DOJ does not secure a sentence for CZ that deters future money laundering conduct in the cryptoverse (and elsewhere), then this "plea deal" could end up backfiring on DOJ."

Stark further said, "Hopefully, DOJ has got something up their sleeve, or perhaps the Binance monitoring and other remedial requirements will reveal more egregious and chargeable crimes. Otherwise, the entire Binance debacle may very well turn out to be a slap on the wrist for CZ and, sadly, a historical injustice of epic proportions.

During the announcement of his resignation, Zhao noted: "I am proud to point out that in our resolutions with the US agencies, they do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation. Funds are SAFU."

The former Binance CEO also admitted that he "made mistakes, and I must take responsibility," before sharing his decision, which was "best for our community, for Binance" and for himself.

Aside from his plan of taking a long break and doing some passive investment, Zhao said, "I can't see myself being a CEO driving a startup again. I am content being a one-shot (lucky) entrepreneur. Should there be listeners, I may be open to being a coach/mentor to a small number of upcoming entrepreneurs, privately. If for nothing else, I can at least tell them what not to do."