Binance former CEO, Changpeng Zhao, also known as “CZ,” is preparing for sentencing in the United States after admitting guilt of violating U.S. money-laundering regulations. District Judge Richard Jones in Seattle will preside over the hearing, which is scheduled to begin at 9 a.m. PDT (1600 GMT).

U.S. prosecutors are pushing for a tough sentence for Zhao, suggesting double the recommended 18-month term under federal guidelines. This emphasizes the seriousness of the charges against Zhao, a former influential figure in the crypto industry. Prosecutors argue that a strong sentence would deter others and stress the importance of obeying the law in the crypto sector.

Former federal prosecutor and Nixon Peabody partner Robert Fisher expressed surprise at prosecutors’ push for a harsh sentence. This was despite Zhao’s guilty plea. Fisher suggested that the prosecution might seek to set a precedent given Zhao’s prominent position in the industry.

Defence requests probation

Zhao’s legal team advocates for probation, citing his acknowledgment of responsibility and the $50-million fine payment. They emphasize his clean record and note the absence of prison sentences in similar cases. Despite the defense’s arguments, the prosecution’s push for an aggressive sentence suggests a contentious legal battle ahead.

Robert Frenchman, an attorney specializing in white-collar crime, noted the unusual nature of the prosecution’s request for a sentence significantly above the guidelines for a defendant who pleaded guilty.

Zhao’s potential sentencing marks a significant development in the legal landscape surrounding cryptocurrency. If convicted, he would become the second major crypto figure to serve prison time after Sam Bankman-Fried, who was recently sentenced to 25 years for embezzling $8 billion from customers of his cryptocurrency exchange, FTX. Bankman-Fried has maintained his innocence and appealed his conviction.

The cryptocurrency industry has come under increased scrutiny from U.S. authorities following the market downturn in 2022, which exposed widespread fraud and misconduct. Zhao stepped down as Binance’s CEO in November amid admissions of evading money-laundering requirements under the Bank Secrecy Act. Binance agreed to a $4.32-billion criminal penalty as part of the settlement.

Allegations against Binance

Prosecutors allege that Binance operated with a lax regulatory framework that facilitated criminal activities. They assert that Binance failed to report over 100,000 suspicious transactions involving designated terrorist groups like Hamas, al-Qaeda, and the Islamic State. Additionally, they accuse Binance of enabling the sale of child sexual abuse materials and receiving proceeds from ransomware attacks.

Prosecutors argue that Zhao prioritized business growth and personal enrichment over U.S. law compliance. They depict his actions as a deliberate defiance of legal obligations.