Federal prosecutors are seeking a three-year prison term for the former CEO of Binance, Changpeng Zhao.

According to the Department of Justice, the ex-head of the world’s largest cryptocurrency platform is deemed deserving of this sentence for willfully disregarding U.S. crypto laws to advance Binance’s expansion.

In a sentencing memorandum issued on Tuesday (April 23), prosecutors stated that Zhao and Binance actively targeted U.S. users as part of the platform’s growth strategy. Despite being aware that this approach would subject Binance to U.S. laws, they knowingly operated the company in defiance of these regulations for an extended period.

Zhao himself acknowledged that violating U.S. laws was crucial for the company’s success and profitability. He boasted that complying with U.S. law would have hindered their growth, stating that Binance would not have achieved its current size or U.S. revenue over the past two years if they had adhered to regulations.

The prosecutors’ request for a 36-month prison term would be a doubling of the initially anticipated 18-month sentence for Zhao, assuming the judge decides on a custodial sentence at the upcoming hearing. Zhao had previously pleaded guilty to failing to establish adequate money laundering controls at Binance, violating the Bank Secrecy Act (BSA).

The failure to implement proper controls, as outlined in the memorandum, enabled illicit actors to exploit Binance for transferring proceeds from fraudulent activities such as scams, hacks, and ransomware attacks.

In response to the memorandum, Zhao’s legal team highlighted that their client has already paid substantial fines and directed Binance to plead guilty last year before resigning. They emphasized Zhao’s remorse for his actions and his willingness to make amends, arguing that no defendant in a similar BSA case has ever been incarcerated and that Zhao should not be the first.

Zhao stepped down as CEO in November, coinciding with Binance agreeing to a record $4.3 billion fine to the U.S. government. This settlement resolved the company’s legal issues with the Department of Justice, the Commodity Futures Trading Commission (CFTC), the Office of Foreign Assets Control, and the Financial Crimes Enforcement Network.

Recently, Zhao’s successor, Richard Teng, acknowledged the company’s past missteps in an interview with CNBC, emphasizing their shift towards a more compliant operational approach and the establishment of a robust compliance program as the company matures.

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