The sentence was imposed by U.S. District Judge Richard Jones in Seattle, who rejected prosecutors’ request that the 47-year-old Zhao serve a three-year term, twice the maximum recommended under federal guidelines.
Once considered the most powerful person in the crypto industry, Zhao, known as “CZ,” is be the second major crypto boss to be sentenced to prison. In March, Sam Bankman-Fried received 25 years behind bars for stealing $8 billion from customers of his now-bankrupt FTX exchange.
Bankman-Fried is appealing his conviction and sentence.
Before handing down the sentence, Jones faulted Zhao for putting growth and profits before complying with U.S. laws.
“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,” he said.
Wearing a navy blue suit and tie, Zhao did not react to sentencing.
Prosecutors said Binance employed a “Wild West” model that welcomed criminals, and did not report more than 100,000 suspicious transactions with designated terrorist groups including Hamas, al-Qaeda and Islamic State.
They also said Zhao’s exchange supported the sale of child sexual abuse materials and received a large portion of ransomware proceeds. Binance agreed to a $4.32 billion penalty.
“I’m sorry”, Zhao told the judge before the sentencing.
“I believe the first step of taking responsibility is to fully recognize the mistakes. Here I failed to implement an adequate anti-money laundering program … I realize now the seriousness of that mistake.”
Prosecutors had told the judge a tough sentence would send a clear signal to other would-be criminals.
“We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster,” prosecutor Kevin Mosley said. But Zhao’s conduct, he said, “wasn’t a mistake. This wasn’t a regulatory ‘oops.'”
Zhao stepped down as Binance’s chief in November, when he and the exchange he founded in 2017 admitted to evading money-laundering requirements under the Bank Secrecy Act.
Lawyers for Zhao requested probation, citing his acceptance of responsibility and paying a $50 million criminal fine.
They also said others who admitted to similar wrongdoing, including BitMEX founder Arthur Hayes, stayed out of prison.
Defense lawyer Mark Bartlett said Zhao “wanted to make a difference in the world,” but made mistakes.
Jones said a three-year sentence was inappropriate because prosecutors did not show that Zhao knew in advance about illegal activity.
“It’s always the case the government asks for more than they think they’ll get,” said Robert Frenchman, a lawyer specializing in white-collar crime. “Going that much above guidelines for a pleader is unusually aggressive.”
Several other crypto moguls are also in the crosshairs of U.S. authorities after the collapse of crypto prices in 2022 exposed fraud and misconduct across the industry.
Zhao had been free on a $175 million bond, and agreed not to appeal any sentence within federal guidelines. Zhao also paid $50 million to the Commodity Futures Trading Commission.
