Changpeng "CZ" Zhao will be sentenced in a federal court in Washington state this month after pleading guilty to one count of violating the Bank Secrecy Act.
Why it matters: CZ and Sam Bankman-Fried (SBF), both founders of enormous and innovative cryptocurrency exchanges, were the two biggest names in the industry through the last boom, and are now both condemned before the courts of the United States.
Catch up fast: In November, less than three weeks after SBF was found guilty in New York of defrauding FTX customers and investors, CZ was charged across the country with one count of failure to maintain an anti-money laundering program at Binance.
- CZ's guilty plea was part of a larger deal with the U.S. government that also saw him stepping down as CEO, and his company paying a $4.3 billion settlement.
The big picture: The question now is how badly it will go for CZ, SBF's first investor and the one who brought him down.
- The nature of charges against the two men were vastly different, as are their expected sentences: SBF just received 25 years, while the charges against CZ reportedly call for up to 18 months in prison.
Between the lines: CZ was released on a $175 million bond but has not been allowed to leave the U.S.
In the charges against him, prosecutors describe how Binance allowed users to start accounts with nothing more than an email address, so long as they stuck to cryptocurrency-only transactions (that is, they deposited funds in cryptocurrency and withdrew it the same way).
- There were some limits on how much a user could withdraw, but there were also easy workarounds.
- In 2021, the company started to tighten requirements around vetting its customers, but that didn't change what had happened before.
- "While Binance developed an internal process for flagging suspicious activity, Binance never filed an SAR [suspicious activity report] with FinCen," the indictment, signed by Tessa Gorman, acting U.S. attorney, and others, noted.
Zoom out: Questions have long swirled around Binance, but nothing seemed to stick. Until it did.
- Along the way, the world's largest crypto exchange was famed as the first exchange to create a token for itself. Binance's BNB has been the fourth-largest cryptocurrency for years (though occasionally overtaken by Solana's SOL).
- The platform also embraced token and altcoin trading amid the ICO boom of 2017, making it easy for speculators to trade around as many crypto assets as possible.
- CZ was never shy about his ambition. "I hope someday I can become as influential as Elon Musk," CZ told CoinDesk in 2018.
- He's set to be sentenced on April 30.
Binance, now under new leadership, just announced its first board. It has seven members, but it has been criticized for being made up largely of insiders.
What else we're watching: The trial of Mango Markets manipulator, Avraham Eisenberg, is set to start Monday in New York.
- Alex Mashinsky, the founder of the lender, Celsius, is set to start Sept. 17, also in New York.
- The civil trial between the SEC and Terraform Labs, creator of terra usd (UST), which collapsed in May 2022, is underway. All these cases are in Manhattan's federal court.
