Changpeng Zhao, the founder and former CEO of Binance, is expected to be released from prison on Friday after completing a four-month sentence for failing to maintain an effective know-your-customer (KYC) program designed to combat money laundering on the world’s largest cryptocurrency trading platform. The situation raises many questions about his future actions.
Under his agreement with the U.S. Justice Department, Zhao is prohibited from “managing or operating” Binance, although he reportedly retains a 90% stake in the company. Previously responsible for all major decisions at the firm, control has now shifted to a seven-member board.
During his sentencing, Zhao expressed regret, stating, “I failed here. I deeply regret my failure, and I am sorry,” as reported by the Associated Press. Despite the consequences, Zhao likely finds some consolation in serving only a short sentence while keeping substantial wealth. Prosecutors quoted Zhao in a court filing from earlier this year, where he admitted, “Better to ask for forgiveness than permission,” referring to the calculated risk he undertook.
Binance was fined $4.3 billion as part of a settlement over money laundering charges with the U.S. Department of Justice, the Commodity Futures Trading Commission, and the U.S. Treasury Department. Zhao personally paid a $50 million fine alongside his imprisonment. As of now, Zhao’s estimated net worth stands at approximately $61 billion, according to Forbes.
While Zhao’s official release date from prison is scheduled for Sunday, officials may release him earlier if the date falls on a weekend or a major holiday, as noted by the crypto news outlet Decrypt.
Zhao founded Binance in 2017 and played a significant role in the downfall of convicted fraudster Sam Bankman-Fried, founder of FTX. The chain of events began when Zhao acquired a 20% stake in FTX in 2019. A split between the two occurred in mid-2021 over regulatory requirements in Gibraltar, leading Bankman-Fried to buy Zhao out for around $2 billion, including a substantial number of FTT tokens.
Zhao’s attempt to sell off hundreds of millions of dollars worth of FTT, a token created by Bankman-Fried, triggered a colossal issue because the token lacked real backing. Consequently, this catalyzed the collapse of Bankman-Fried’s crypto empire, revealing a massive fraud as people rushed to withdraw funds that were nonexistent.
Bankman-Fried is now serving a 25-year sentence for fraud and conspiracy. Caroline Ellison, another key figure in the FTX scandal, received a two-year sentence and must forfeit $11 billion, substantially more than Zhao’s penalties.
Questions remain about Zhao’s future involvement with Binance. Current CEO Richard Teng addressed this uncertainty earlier this week on the Altcoin Daily podcast. When asked about Zhao’s potential return to Binance in any capacity, Teng replied, “CZ’s a major shareholder. Those questions are meant for CZ, they’re not meant for me.”