3 Reasons Why Changpeng Zhao Prison Can Be 3 Years Long

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The United States justice system has requested a three-year prison term for Binance founder Changpeng Zhao in response to his alleged violation of American regulations. This legal dispute has persisted for several months, with an initial sentencing date set for late February. However, due to recent filings of new appeals, the resolution of this case has been postponed until the last day of April.

Previously, Sam Bankman, the creator of the FTX exchange, had been penalized with a 25-year prison sentence for comparable misdeeds.

So, why is Changpeng Zhao in trouble now? Let’s discuss that in this blog.

Changpeng Zhao Pleads Guilty For Multiple Violations

Since its launch, Binance has rapidly grown in popularity and amassed a large user base. Currently, it holds the distinction of being the largest centralized cryptocurrency exchange with a trading volume of over $20.8 billion. In 2021 alone, Binance’s trading volume surpassed that of the next four largest exchanges combined.

Despite assurances of operating honestly and providing clear dealings, the exchange has been found to be in violation of regulations. Some suspect that the exchange engaged in fraudulent activities and rule-breaking soon after beginning operations in 2017.

In the persistent court case, Binance and its CEO Changpeng Zhao are accused of breaking three key American laws. These infractions could lead to a fine of $50 Million against Binance and a possible three-year jail term for Changpeng Zhao.

The DOJ’s request for an additional 18 months of prison time beyond what was agreed upon in the plea deal was denied, resulting in a total sentence of 36 months.

Conducting Unlicensed Money Transmitting Business

Binance has been operating without a license in the USA and a few other countries. The company was originally established in China, but due to a total prohibition on cryptocurrencies and related businesses, Binance relocated its operations to Japan.

Following the relocation of the exchange’s headquarters to Japan, it was discovered that they had been conducting unlicensed trades. Subsequently, the exchange carried on with operating in the United States without obtaining a required license. This information became known to the public through an SEC disclosure.

Since at least 2020, the US Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have been probing Changpeng Zhao and Binance exchange for suspected wrongdoings. In March 2023, Binance faced a lawsuit from the Commodity Futures Trading Commission (CFTC), accusing it of bypassing American regulations and operating unlawfully within the US territory.

Binance failed to comply with licensing requirements in countries such as the UK, Japan, and Thailand.

Changpeng Zhao Violated The Sanctions

The United States enforces particularly stringent laws and guidelines for the finance and economy fields. A recent conversation between two senior Binance executives disclosed that, despite repeated cautions, an aspect of Binance continues to operate unlicensed within the US borders. For a financial business to legally function, it is required to register as a money services enterprise. However, Binance has reportedly disregarded this regulation for an extended period.

In late June, the SEC brought a case against Binance over their concealed ownership of Binance US. It was alleged that the firm had mishandled user funds in this subsidiary. Consequently, Binance was required to pay approximately $4.3 Billion in penalties and fines for various criminal offenses in November.

During that period, Changpeng admitted to breaking the US anti-money laundering laws and stepped down as CEO. The business carried on managing its activities with a hefty $4.3 Billion penalty.

Violating The Bank Secrecy Act

The Bank’s confidentiality law requires the implementation of customer identification (KYC) and anti-money laundering protocols, which the company neglected. As a major digital currency trading platform, the firm handled vast transactions without KYC checks in place. This situation sparked controversy, leading to involvement from Changpeng Zhao during the ensuing crisis.

Binance’s refusal to adhere to India’s PMLA law led to its ban on all websites and apps within the country. The PMLA, or Prevention of Money Laundering Act, aims to control foreign investments in Indian banking assets. There have been whispers that Binance may be permitted to resume operations in India following a significant penalty.

Final Thoughts

At the court hearing on Tuesday, the US prosecution proposed a three-year sentence for Changpeng Zhao. They emphasized the gravity of the infractions that occurred in the Western District of Washington. However, Zhao’s legal team argued against imprisonment. They cited his remorse for the actions and payment of all resulting fines. Instead, they suggested alternatives like probation or home confinement as potential punishments.

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2024-04-24 16:52