Binance’s billionaire founder to find out if prison time is coming — here’s what lawyers are expecting
Zhao Changpeng, founder and chief executive officer of Binance, attends a conference at Porte de Versailles exhibition center in Paris, France June 16, 2022.
Benoit Tessier | Reuters
Changpeng Zhao, the founder and former CEO of crypto exchange Binance, heads to a Seattle courtroom on Tuesday to learn whether the crimes he admitted to committing will land him in prison for an extended sentence.
In November, Zhao pleaded guilty to enabling money laundering at Binance. As part of his plea deal with the Department of Justice, Zhao agreed to step down as CEO. For months, U.S. District Judge Richard Jones has been weighing the appropriate punishment for Zhao, also known as CZ.
Once a titan of the crypto sector, Zhao grew Binance into the world’s largest centralized crypto exchange globally. The company held assets of more than $65 billion by the time he stepped down. Unlike rival exchange FTX, which collapsed into bankruptcy when founder Sam Bankman-Fried was criminally charged, Binance has continued to operate.
Assets on the Binance platform totaled more than $122 billion, according to blockchain data firm Nansen, a roughly 88% jump that follows a sharp increase in crypto prices in recent months.
Prosecutors say Zhao violated U.S. law on an “unprecedented scale,” according to their sentencing memorandum to the court, and that he showed a “deliberate disregard” for Binance’s legal responsibilities, operating the exchange on a “Wild West” model.
Zhao is accused of willfully failing to implement an effective anti-money laundering (AML) program as required by the Bank Secrecy Act, and of allowing Binance to process transactions involving proceeds of unlawful activity, including between Americans and individuals in sanctioned jurisdictions.
Binance processed a whopping $18.1 trillion worth of trading volume in 2023, according to data from CCData, a crypto market data firm.
Around 80% — or $14.4 trillion — of that came from derivatives products like futures contracts, while the remaining $3.7 trillion came from spot trading. Derivatives trading is a key part of Binance’s business.
Zhao has agreed to pay a $50 million fine in addition to the $4.3 billion in fines and forfeiture that Binance was ordered to pay for violating the U.S. Bank Secrecy Act and sanctions on Iran. The action was a joint effort by the Justice Department, the Commodity Futures Trading Commission and the Treasury Department, while the SEC, which brought its own suit against the exchange, was notably absent.
The government is asking for a sentence of three years, double the high end of the guidelines range to “reflect the gravity of his crimes,” the prosecutors’ memo says.
Zhao’s lawyers have asked for five months’ probation. They say Zhao has accepted responsibility for dodging AML requirements, and that he has a history of philanthropy and community service. Additionally, he’s already spent more than five months in the U.S., away from family, since pleading guilty.
More than 160 of Zhao’s supporters, including family members, Binance customers, and Emirati royalty, have written notes to the court to appeal for mercy.
Prison time likely
Most experts who spoke to CNBC about the upcoming sentencing predict Zhao will spend some time behind bars.
“This is a high-profile case and the judge will feel pressure not to be soft during sentencing,” Former federal prosecutor Neama Rahmani told CNBC. He expects a sentence of a year or two.
Braden Perry, a former senior trial lawyer for the CFTC, said federal sentencing guidelines provide a framework but allow judges some discretion.
“For CZ, a first-time nonviolent offender, the sentencing guidelines call for an advisory range of 10 to 16 months,” said Perry, currently a partner at law firm Kennyhertz Perry.
Working in Zhao’s favor, Perry said, is that the defendant never went to trial, saving judicial and prosecutorial resources, and that he accepted responsibility and settled with multiple agencies, all concessions that might influence the judge’s decision.
“I believe the judge will acknowledge the vast scale of potential suspicious transactions and the prior lax AML program but recognize the efforts and remediation taken,” Perry said. “Taking into account all the factors, I predict a guideline sentence with a term of incarceration. This will deter yet account for the guilty plea and all other factors used in the sentencing decision.”
Yesha Yadav, law professor and associate dean at Vanderbilt University, is looking for the judge to impose a sentence “in the low single digits – perhaps three years.” However, that could include minimal time in prison and the rest on probation.
Yadav suggested that Zhao will benefit from Binance’s contrast to FTX, which was “revealed to have been a criminal enterprise.“
“While Binance has been convicted of extremely serious charges, it still remains an operational, albeit weakened, business that continues to attract customers and is looking to revive its fortunes by focusing on compliance under a monitorship regime,” Yadav said.
Former federal prosecutor Paul Tuchmann also expects some prison time due to the failure to implement AML requirements, as well as the volume of funds that flowed through Binance without being subject to such controls.
“While he is a first-time offender, those factors I just mentioned are likely to outweigh the lack of criminal history,” Tuchmann said. “The need for general deterrence in the crypto industry, and the financial sector generally, is so great, that I assume that DOJ will take the position, and a judge will likely agree, that a message needs to be sent through this sentence that the consequences for violating these rules can’t just be seen as a cost of doing business.”
Los Angeles corporate law attorney Tre Lovell said a shorter sentence, in the range of five to seven months, is likely, along with extended probation.
Lovell added that, unlike Bankman-Fried, who was convicted of fraud and sentenced to 25 years in prison, Zhao hasn’t been charged with fraud or other crimes deserving of a longer sentence.
“In addition, his letter to the judge does reflect remorse, discusses his making of poor decisions, and indicates that the Binance platform has instituted strict anti-money laundering controls at his direction,” Lovell said.
David Weinstein, a former federal and state prosecutor who now practices as a corporate compliance and white collar defense attorney at Jones Walker, said prison sentences represent an important deterrent.
“I think the sentence will end up just under a year,” he said.
WATCH: Bankman-Fried sentencing
Tesla has released a new video that includes some footage of a previously unseen vehicle interior. Could it be an early concept of the interior of the Robotaxi?
For the last few years, Tesla has been working on a vehicle designed from the ground up to be a self-driving vehicles. The company has been referring to it as ‘Robotaxi’.
CEO Elon Musk insists that Tesla is still dedicated to delivering its promised self-driving capability to existing vehicles delivered since 2016 through software update, but it also decided to build a new vehicle designed entirely around the fact that it will be driverless.
Not much is known about the vehicle other than hints that it won’t have a steering wheel or pedals, and that it will be “Cybertruck-like” in terms of design.
Now, Tesla has released a new video, which Musk wanted to make clear he wasn’t involved in, to try to encourage shareholders to vote for his $55 billion compensation package and moving the company’s state of incorporation to Texas:
In the video, many pointed out a shot of the interior of a vehicle that doesn’t match anything Tesla has released to date:
The image shows what appears to be a two-seater vehicle without steering wheel and a center display similar to what is found in current Tesla vehicles.
The seats are unlike what you would find in modern vehicles and something closer to what you would find in public transit, like a train:
Tesla plans to unveil its ‘Robotaxi’ on August 8th. The automaker has recently accelerated its timeline for the vehicle and plans to bring it to market as soon as next year.
Do you think this is an early concept for the Tesla Robotaxi interior? Let us know in the comment section below.
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Mercedes-Benz High-Power Charging just opened more DC fast chargers at Buc-ee’s stores in the Dallas-Forth Worth area.
Three new Mercedes DC fast charging stations are at Buc-ee’s in Fort Worth, Temple, and Royse City. Mercedes asserts that every one of its chargers offers up to 400 kW of power.
It’s also adding 12 more charging stations at Buc-ee’s in the Dallas-Fort Worth, San Antonio, and Houston metro areas – also known as the Texas Triangle, home to 68% of Texans:
Buc-ee’s isn’t your typical convenience store – they’re huge, with some stores covering over 50,000 square feet, and they offer a wide variety of items, including snacks, beverages, fresh food, clothing, home decor, and Texas-themed merchandise. It’s known for its homemade fudge, jerky, and beaver nuggets (caramel-coated corn puffs). Most Buc-ee’s locations are open 24 hours a day, seven days a week.
In November 2023, Mercedes announced it had made an agreement with Buc-ee’s to build EV charging hubs at most of its existing stores. Mercedes is aiming to have around 30 online by the end of the year. There are currently 48 Buc-ee’s locations across the US South, 34 of which are in Texas.
When I spoke to Mercedes-Benz High Power Charging CEO Andrew Cornelia last year, he was passionate about the importance of placing EV chargers near amenities that travelers need.
Mercedes offers open access for all EV drivers, including roaming with other charging networks. Its charging hubs support contactless payments with credit cards or smartphone wallets.
The first Mercedes DC fast charging station came online last November at its headquarters in Sandy Springs, Georgia. Mercedes-Benz plans to deploy 2,500 high-powered chargers in 400 hubs by 2027.
Texas is the US’s No. 1 producer of clean energy and ranks fourth in public EV charging. However, to meet driver demand, the state needs around 95,000 more public chargers by 2027.
Read more: America, Mercedes-Benz wants you to indulge in retail therapy while you’re DC fast charging
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Environment
Polestar (PSNY) stock faces potential Nasdaq de-listing after failing to file its annual report
Another EV stock may be removed from the Nasdaq exchange. After failing to file its annual report, Polestar (PSNY) received a notice from the Nasdaq as the company faces a possible de-listing.
Polestar, Volvo’s former high-performance unit, was established as an EV brand in 2017 under Geely’s control.
Since launching the Polestar 2, its first all-electric vehicle, the brand has expanded into 27 markets globally. The electric car has even become a top seller in several key markets like Norway, Sweden, and Germany.
However, like many EV startups, Polestar has hit its fair share of hurdles. After cutting guidance late last year (from 80K to 60K), Polestar still missed its target, delivering 54,600 vehicles last year.
In February, Volvo announced plans to sell 62.7% of its stake in Polestar as it looks toward its next growth stage. Volvo also confirmed it will “not provide further funding to Polestar” outside of its existing $1 billion outstanding convertible loan.
The news came after Polestar announced plans to cut 15% of its global workforce amid slowing EV sales earlier this year.
Polestar stock facing potential Nasdaq de-listing
After failing to file its annual report for the fiscal year ending December 31, 2023, Polestar received a deficiency notice from the Nasdaq.
The notice states Polestar is not in compliance with its listing rules, which require the timely filing of periodic financial reports.
Polestar said the notice has no immediate impact on the company’s listing. However, under the Nasdaq listing rules, Polestar has 60 days to submit an action plan. If Nasdaq accepts it, Polestar could be issued an additional 180 days from the notice date, or until November 2024, to regain compliance.
The company has already received consent from lenders under its nearly $1 billion 3-year loan facility for the late filing. Polestar says it is fully committed to regaining compliance.
Polestar is working to file the annual report “as soon as practicable” and to report Q1 2024 earnings shortly after.
Polestar stock was down over 13% on Monday following the potential de-listing notice. PSNY shares are now down over 50% this year, hitting their lowest prices since going public.
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