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
Subaru is the latest Japanese automaker to announce it will “re-evaluate” its EV plans. The company is rethinking its strategy with slowing sales and a potential multi-billion-dollar hit from Trump’s auto tariffs. The tariffs might not even be Subaru’s biggest threat.
Subaru and other Japanese automakers adjust EV plans
Within the past week, Japanese automakers, including Nissan, Honda, Toyota, and now Subaru, have announced major adjustments to their EV plans.
After releasing fiscal year financial results on Wednesday, Subaru’s CEO, Atsushi Osaki, said, “We are re-evaluating our plans, including the timing of investments.” Osaki added that the move is due to “today’s rapidly changing environment” and other external factors.
Like most of the industry, Subaru is bracing for a shift under the Trump administration, which could cost it billions. With around half of its vehicles sold, the US is key for the Japanese automaker.
Subaru said Trump’s new auto tariffs could cost the company up to $2.5 billion this year. The automaker is looking at ways to boost US production, but it won’t be easy.
Tomoaki Emori, Subaru’s senior managing executive director, said (via Automotive News), “Under the current circumstances, there is probably no way not to expand in the US. We must think about how to go about that.”
Emori added that the company still has the production capacity, “so we would like to mitigate the impact of tariffs while making use of it.”
Subaru joins a growing list of automakers in pulling its earnings forecast, citing “developments in US tariff policy” make it hard to forecast.
The company’s global sales fell 4.1% to 936,000 units over the past year. In North America, deliveries also fell 4.1% to 732,000 vehicles. Subaru anticipates global sales will continue dropping to around 900,000 this year, or another 4% drop. A part of the forecast is due to downtime at its Yajima plant as Subaru prepares to produce EV batteries.
Osaki said Subaru is “making various preparations for a BEV-dedicated plant,” but added it may add a mix of gas-powered vehicles.
Subaru unveiled its second EV for the US at last month’s NY Auto Show, the 2026 Trailseeker. The Outback-sized electric SUV will go on sale in 2026, joining the smaller Solterra in Subaru’s EV lineup in the US.
Since “It is becoming more difficult to decide how to incorporate electrification into our production mix,” Emori said, Subaru is “thinking about how to incorporate hybrids and plug-in hybrids.”
Electrek’s Take
Subaru and other Japanese automakers are quickly falling behind Chinese EV leaders like BYD in some of their most important sales regions, like Southeast Asia.
Delaying new EV models and other projects will only set them further behind in the long run. Nissan is in crisis mode after scrapping plans to build a new battery plant in Japan. The facility was expected to produce lower-cost LFP batteries, which could have helped Nissan compete on costs with BYD and others.
Last week, Toyota’s President, Koji Sato, said the company will be “reviewing” its goal of selling 1.5 million electric vehicles by 2026. And just yesterday, Honda announced plans to pause around $15 billion in planned EV investments in Canada.
BYD and other EV leaders are expanding overseas to drive growth after squeezing foreign brands, especially Japanese automakers, out of China.
Next year, BYD is launching its first kei car, or mini EV, that’s expected to be a big threat to Japanese automakers. A Suzuki dealer (via Nikkei) warned, “Young people do not have a negative view of BYD. It would be a huge threat if the company launches cheap models in Japan.”
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Porsche Cars North America has integrated over 97,000 more charging stations into its app, streamlining its Porsche Charging Service.
That brings the total number of EV charging stations available to Porsche Charging Service customers in the US to 102,000, with more scheduled to be added in 2025. That means Porsche drivers can now use the My Porsche app as a one-stop shop to easily find, use, and pay at most J1772 and CCS charging stations.
“This is a significant milestone for Porsche and the electric vehicle journey,” said Timo Resch, president and CEO of Porsche Cars North America. “We know flexibility and choice are important.”
Customers in the Porsche Charging Service inclusive period – that’s the year after you buy your EV – or who sign up for Porsche Charging Service Premium can now access the ChargePoint, EV Connect, EVgo, Flo, EvGateway, and Ionna networks, in addition to chargers in the Electrify America network.
Customers in the Porsche Charging Service Base plan will receive access later this summer.
Read more: ChargePoint unveils ‘revolutionary’ V2X EV charger tech that can double Level 2 speeds
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Tesla’s (TSLA) board is reportedly exploring a new CEO pay deal for Elon Musk, who might not get back his $55 billion 2018 compensation package.
According to a new Financial Times report, Tesla’s board created a new “special committee” to explore a new CEO pay package for Musk.
The report points to the committee looking at new stock options and “alternative ways” to compensate Musk if Tesla fails to reinstate his 2018 compensation package, which was rescinded by a judge who found that Musk negotiated the deal with a board under his control and then misrepresented it to shareholders.
Musk is Tesla’s largest shareholder and therefore, he stands to benefit the most when the company does well. However, he doesn’t take a salary for his role as CEO.
Historically, He has received stock compensation packages, with the one secured in 2018 being the controversial one currently under contention.
Since then, no new CEO compensation package has been approved, and Tesla has not suggested another one as it tried to appeal the judge’s decision on the 2018 package.
The company is currently attacking the decision on two fronts with an appeal to the Delaware Supreme Court and a new legislation in Delaware to try to circumvent the decision altogether.
FT reporting that the board is working on a new compensation package with backpay could point to Tesla anticipating not being able to reinstate the original compensation package.
Robyn Denholm and Kathleen Wilson-Thompson are the board members reportedly on the new committee.
Denholm took over from Musk as Tesla’s chair, and she has recently made headlines for selling her Tesla stock options for more than $530 million over the last few years.
Electrek’s Take
It increasingly looks like Tesla won’t be able to distance itself from Musk and separate its fate from his.
Musk has masterfully convinced Tesla shareholders that the destruction of its core business, selling electric vehicles, doesn’t matter because the company is on the verge of solving self-driving – something he has claimed every year for the last 6 years and has been wrong every time.
Now that they don’t care about EVs, there’s no point in blaming Musk for killing demand and delivering a single new vehicle in 5 years, the Cybertruck, a commercial flop.
Therefore, the only thing that will make Tesla shareholders stop wanting Musk as CEO is if they stop believing his self-driving and humanoid robot claims.
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