Changpeng Zhao may face 10 years in prison for money laundering, and the U.S. Department of Justice: He should not return to the UAE before the verdict is announced

Justice Department lawyers not only reiterated that Changpeng Zhao should be confined to the continental United States and prohibited from traveling to the United Arab Emirates until the verdict was announced, but also made it clear for the first time that the U.S. government might argue that Changpeng Zhao should be sentenced to 10 years in prison at the time of sentencing, according to a court filing from the U.S. Department of Justice.

John Reed Stark, a senior lecturer at Duke Law School and former director of the SEC's Office of Internet Enforcement, argued that the judge should prohibit Changpeng Zhao from traveling to the UAE ahead of the sentencing hearing. If the DOJ fails to secure a verdict against Changpeng Zhao to stop future money laundering in the crypto space and beyond, the $4.3 billion "plea agreement" could end up in the DOJ.

On November 21, local time, Binance founder Changpeng Zhao left the federal courthouse in Seattle.

Changpeng Zhao, founder and former CEO of Binance, the world's largest cryptocurrency exchange, pleaded guilty to money laundering and could face 10 years in prison.

The legal community generally believes that Changpeng Zhao may be sentenced to 12-18 months in prison, but on November 24, local time, a court document from the U.S. Department of Justice clearly revealed for the first time that the U.S. government may argue that Changpeng Zhao should be sentenced to 10 years in prison when the sentence is announced. The filing also revealed that U.S. Department of Justice lawyers reiterated that Changpeng Zhao, a UAE citizen, should be restricted from living in the continental United States and prohibited from traveling to the United Arab Emirates until the verdict was announced. But the U.S. magistrate agreed to release Mr. Zhao on $175 million bail, and Mr. Zhao's lawyer argued that he was not at risk of absconding.

"Changpeng Zhao's crime is not a parking ticket, but the equivalent of mass murder and chaos, and his wealth and special citizenship of the non-extraditable country put Changpeng Zhao at legal risk of escape. John Reed Stark, a senior lecturer at Duke University Law School and former director of the SEC's Office of Internet Enforcement, said Nov. 26 that judges should barred Changpeng Zhao from traveling to the United Arab Emirates ahead of the sentencing hearing. If the DOJ can't secure a verdict against Changpeng Zhao to stop future money laundering in the crypto space and beyond, it could end up being a backlash for the DOJ.

Changpeng Zhao pleaded guilty to money laundering and could face 10 years in prison

Previously, the U.S. Department of Justice had charged Changpeng Zhao and others with violating the U.S. Bank Secrecy Act for failing to implement an effective anti-money laundering program and knowingly violating U.S. economic sanctions. Binance allows criminals to conduct transactions related to child sexual abuse, drugs, and terrorist financing on its platform, allows illegal actors to make more than 100,000 transactions in support of activities such as terrorism and illegal drugs, allows more than 1.5 million virtual currency transactions that violate U.S. sanctions, allows transactions related to al-Qaeda, and even has processes in place to notify VIP users if they become the subject of an investigation by law enforcement.

On November 21, local time, Changpeng Zhao pleaded guilty to money laundering charges and resigned as CEO. Changpeng Zhao agreed to pay a $150 million fine to the U.S. Commodity Futures Trading Commission, and Binance agreed to pay $4.3 billion to U.S. authorities to settle criminal charges, the largest corporate and settlement agreement in U.S. history involving criminal charges from executives.

So far, the general consensus among legal experts is that Changpeng Zhao could be sentenced to 12-18 months in a minimum security prison according to U.S. sentencing guidelines. However, on November 24, local time, a court document from the U.S. Department of Justice disclosed that the Justice Department's lawyers not only reiterated that Changpeng Zhao should be restricted from living in the continental United States and prohibited from traveling to the United Arab Emirates before the verdict was announced, but also made it clear for the first time that the U.S. government might argue that Changpeng Zhao should be sentenced to 10 years in prison when the verdict was announced.

In the vast majority of cases, a billionaire defendant who has pleaded guilty, faces prison time, and lives in a country that does not extradite his citizens to the United States will be detained, the documents show. Changpeng Zhao has no ties to the United States, he is a UAE citizen, his family lives in the UAE, and his property is abroad, including in the UAE. He obtained citizenship through an invitation, and while Changpeng Zhao described the invitation and citizenship as an "honor" that would not be used to evade U.S. law, it showed that he had close ties to the UAE. Given these relationships, there is no reason to believe that the UAE will hand him over if Changpeng Zhao decides not to return to the United States to face an uncertain verdict. Therefore, the court was requested to require Changpeng Zhao to remain in the continental United States during his guilty plea and sentencing.

$175 million bail, whether he can leave the United States before the verdict is handed down next year

Changpeng Zhao's sentencing hearing is currently scheduled for February 23, 2024. According to Stark, a senior lecturer at Duke University Law School and former director of the SEC's Office of Internet Enforcement, on November 26, it may be changed to a later date, and Changpeng Zhao's verdict will not be known until then.

Previously, U.S. District Judge Brian Tsuchida agreed to release Changpeng Zhao on $175 million bail. The U.S. Department of Justice has asked U.S. District Judge Richard Jones to reverse Tsuda's decision by Monday to allow Changpeng Zhao to return to the United Arab Emirates before the verdict is pronounced on Feb. 23. Mr. Zhao's lawyer urged the U.S. judge to reject the Justice Department's request that the judge allow Mr. Zhao to leave the country before sentencing.

According to CNBC, lawyers argue that Changpeng Zhao has proven that he is not at risk of absconding because he agreed to a "sizable" bail and voluntarily came to the United States to take responsibility for his actions, and that allowing Changpeng Zhao to return to the UAE will allow him to take care of his partner and three children and prepare them for his sentencing.

Stark said that at the initial bail hearing, Tsuda set Nov. 27 local time as the deadline for reviewing Changpeng Zhao's bail order, and it was clear whether Jones would allow Changpeng Zhao to travel to the United Arab Emirates before the verdict was announced. Stark's view is that the judge should prohibit Changpeng Zhao from traveling to the UAE before the sentencing hearing. "Changpeng Zhao's crime is not a parking ticket, but the equivalent of mass murder and chaos, and his wealth and special citizenship of the non-extraditable country put Changpeng Zhao at legal risk of escape. ”

"As for sentencing, first of all, I wouldn't be surprised if Changpeng Zhao doesn't cooperate, violates his guilty plea conditions (including a litany of restrictions and a three-year ban on contact with Binance), or takes other actions to undermine his guilty plea arrangement. Stark said the most important harsh reality is that if the DOJ can't secure a verdict against Changpeng Zhao to stop future money laundering in the crypto space and beyond, then this "plea agreement" could end up being a backlash for the DOJ. He hopes that the U.S. Department of Justice will do something about it, or that Binance's surveillance and other remedial demands will reveal more allegations of serious crimes. Otherwise, the collapse of Binance as a whole could well be a slap in the face to Changpeng Zhao, which, sadly, is an epic historical injustice. ”