CZ Sentenced to Four Months for Money Laundering

The United States has sentenced Changpeng Zhao “CZ,” the founder of the world’s largest cryptocurrency exchange, to four months in prison for money laundering.

For context: The crypto boss had pleaded guilty to violating money laundering laws in the US and thereafter resigned from the exchange, back in November 2023. The court asked the exchange to pay $4.3 billion for violating money laundering norms.

The prosecutors claimed in the court that CZ put his exchange’s growth and profit prospects over compliance with US laws and regulations and violated the Bank Secrecy Act. The violation made it possible for the funds to be laundered to terrorists and cybercriminals.

The US ordered the exchange to pay $4.3 billion in fines. CZ himself agreed to pay a fine of $50 million.

The prosecutors sought a three-year jail sentence for the tycoon. However, Zhao struck a deal with the US government and agreed to resign from his position as the company’s CEO.

Reportedly, Zhao has an estimated 90% stake in the crypto exchange.

Did you know? CZ is the richest person ever to go to prison in the U.S.

Interestingly, the Department of Justice (DoJ), the Commodity Futures Trading Commission (CFTC) and the Treasury Department worked together on the case while the leading securities regulating body, the Securities and Exchange Commission (SEC), remained absent from the whole story. 

“You had the wherewithal, the finance capabilities, and the people power to make sure that every single regulation had to be complied with, and so you failed at that opportunity,” U.S. District Judge Richard Jones said to Zhao in a Seattle federal court, as per a Reuters report.

Another Explosion After SBF

The court judgement on Zhao comes on the heels of another crypto tycoon Sam Bankman-Fried "SBF" being sentenced in March to 25 years in jail.

SBF was found guilty on seven counts of fraud in November 2023 and was sentenced to 25 years in prison in March 2024.

As we can see, the jail terms for CZ and SBF are wildly different.

The customer balance of SBF’s FTX crypto exchange was depleted from $20 billion to $5 billion to fund Alameda Research, a sister concern of FTX being run by SBF's then-partner Caroline Ellison.

Till date, the collapse of FTX in November 2022 is the biggest crypto fraud and among the biggest corporate frauds in history.

CZ and SBF Go Back a Long Way

Interestingly, CZ and SBF had earlier crossed their paths when CZ purchased a 20% share of FTX for $80 million in 2019. CZ exited that shareholding last year and received $2.1 billion in FTT tokens among other crypto tokens as part of the deal in 2021.

As the news of the trouble at FTX spread in late 2022, CZ decided to liquidate all the FTT tokens.

In a few days, FTX filed for bankruptcy – and the rest is history.

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