Changpeng “CZ” Zhao, the founder and former CEO of Binance, has officially apologized for his past decisions in a comprehensive letter to the judge overseeing his trial. This apology came just days before his sentencing, scheduled for April 30, following a plea deal with the U.S. Department of Justice in late 2023.
Despite previously waiving his right to appeal any sentence under 18 months, the Department of Justice is now pushing for a three-year term.
Zhao’s letter to Judge Richard A. Jones of the Western District of Washington openly admits his failure to implement crucial compliance measures at Binance and promises that this legal trouble will be his last.
Furthermore, Zhao outlines his future intentions, which include supporting biotechnological innovations and youth initiatives. His plea was accompanied by 161 letters from various supporters, advocating for leniency due to his character and contributions.
Zhao’s Wide Circle of Support
The range of individuals backing Zhao is extensive.
His sister, Jessica Zhao, a former Managing Director at Morgan Stanley, commended him for his ongoing efforts to do good despite his errors. She highlighted his prudent management during the FTX crisis to ensure that Binance never misappropriated customer funds.
Yi He, a co-founder of Binance and the mother of Zhao’s three children, compared him to a “guardian of the wilderness” in the chaotic cryptocurrency industry.
CZ’s wife, Yang Weiqing, with whom he shares two children, cited their philanthropic efforts, including a substantial donation to Japan’s disaster-affected areas in 2018. His US-based university student children, Rachel and Ryan Zhao, portrayed him as a supportive father, urging the judge to view their father beyond this solitary incident.
From within the academic industry, Zhao received backing from Professor Jeremy R. Cooperstock of McGill University and Associate Professor Ronghui Gu of Columbia University, both highlighting his contributions to technology and innovation.
Further support came from Tigran Gambaryan, Head of Financial Crime Compliance at Binance, who despite being detained in Nigeria due to a separate issue, spoke highly of Zhao’s business acumen and philanthropic efforts.
U.S. figures like former Senator and Ambassador Max S. Baucus, and business leaders like Morgan Stanley Managing Director Sean Yang, also submitted letters vouching for Zhao’s character and professional integrity. Even members of the ruling family in the United Arab Emirates provided their endorsements, reflecting Zhao’s broad and positive impact on a global scale.
Legal Arguments and Defense Strategy
Zhao’s legal team is strongly defending his unawareness of any illegal transactions on his platform, highlighting that these transactions were a minuscule fraction of the exchange’s total activity and therefore unlikely to have been deliberately facilitated by him.
They argue for probation, citing his non-repetitive breach and lack of prior knowledge about the specific illegalities. The defense also emphasized the international aspect of Binance’s operations, explaining that as a non-U.S. entity, Binance was not barred from servicing users in U.S.-sanctioned countries.
This point underscores the novel legal challenge Binance faces, where its automated systems inadvertently enabled transactions between these users and those in the U.S., a scenario not previously adjudicated.
In their plea agreement, Zhao and Binance consented to severe consequences beyond potential prison time. Binance has agreed to pay a $4.3 billion fine and will operate under a court-appointed monitor, a position yet to be filled.
The legal proceedings have affected Zhao’s personal life big time. Originally slated for sentencing in late February, the proceedings were delayed until April 30. Since appearing in court in Seattle, Zhao has been blocked from returning to Dubai, where he lives with his family.
Throughout the defense filings, Zhao was described as being uninformed of the transactions involving criminal funds, directly challenging the idea that he deliberately engaged in sanction violations.
The sanctions-related charge, a narrow and first-time application against Binance, claimed that an algorithmic matching engine unknowingly breached U.S. sanctions law by pairing users from sanctioned countries with U.S. users, a minute part of Binance’s trading volume.
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