The US Department of Justice has ordered Changpeng Zao, the former CEO of major cryptocurrency exchange Binance, to remain in the United States until sentencing. This decision could have serious implications for Binance, as Zao is a key figure in the exchange's operations.
The US DOJ is not yet done putting pressure on Binance. The latest case involves its former boss Changpeng Zao ("CZ"). After he agreed to leave his post last week, the DOJ forced him to stay in the US until his sentencing on February 23. He faces a sentence of 18 months in prison.
US authorities believe he is currently too exposed to flight risk. CZ traveled to the US last week as part of an agreement reached between Binance and the US Department of Justice after several years of investigating the cryptocurrency exchange. The investigation into Binance's operations began in 2019. The investigation uncovered violations of anti-money laundering and financial intelligence laws. In particular, Binance did not require its users to provide information about the origin of the funds they used to trade cryptocurrency. Binance agreed to pay two fines of $3.4 billion and $968 million to two US Treasury agencies. In return, 'CZ', his diminutive name, agreed to plead guilty to violating US anti-money laundering laws and agreed to resign. The billionaire was ordered to pay a $50 million criminal fine and post $175 million bail to be released.
CZ's attorney argued last week that his client, who is not a US citizen and holds passports from the United Arab Emirates and Canada, is not a flight risk and can remain close to his family. "The sanctions imposed on him at sentencing are likely to be significant and speak in favor of the reasonable restrictions proposed by the United States," the DOJ said. CZ, 46 year old, has lived in the United Arab Emirates for several years with his partner and three children.
In the past, the US DOJ has also charged owners of other cryptocurrency exchanges with violating anti-money laundering laws. For example, in 2020, the US DOJ filed charges against the founders of the BitMEX exchange. In 2022, the US DOJ filed charges against the founders of the Huobi exchange.
The DOJ's decision to keep CZ in the US is a major blow to Binance. It could prevent the exchange from restoring its reputation and regaining the trust of its customers. In addition, it could have implications for the entire cryptocurrency industry, which is already under the scrutiny of the US authorities.