Former Binance CEO Changpeng Zhao may have received a lenient sentence for the following reasons:
1. His reputation and characteristics
- The judge, lawyers and prosecutors acknowledged that Zhao was not an ordinary criminal defendant. He was considered a philanthropist who had broken the law for the first time; a family man who gave up and accepted the consequences;
- The judge took into account numerous letters of support from friends, relatives and colleagues of Zhao;
2. His cooperation with the authorities
- Lawyers emphasized Zhao's cooperation with the US government;
- He made a deal with the prosecution, agreed to pay a $50 mln fine and voluntarily arrived in the United States from the UAE, where he lived;
3. No criminal record
Although Zhao's personal circumstances and cooperation were taken into account by the court, the gravity of the charges and the possible consequences for the industry likely caused a muted reaction from the crypto market. His soft sentence was not received positively enough for the following reasons:
1. Serious nature of the charges. Zhao was accused of widespread infringement of the Bank Secrecy Act, money laundering and sanctions breaches. Hundreds of millions of dollars’ worth of transactions were funneled through Binance.
2. The Justice Department views this case as a landmark sentence and a benchmark for future similar violations. A lenient punishment could set a dangerous precedent for the crypto industry.
3. Judge's assessment. The judge explicitly stated that the fact that Zhao headed the largest crypto exchange did not give him the right to choose which rules to break.
4. The Binance exchange is still suffering from the consequences of this litigation: its market share has decreased, while competitors have expanded their influence. This could raise concerns about the future of Binance.
Add to this that Zhao is no longer directly associated with Binance and did not manage the exchange after November 2023. Richard Teng was appointed as the new CEO.
Binance was fined $4.3 bln and agreed to cooperate with regulators. Further court decisions in Zhao's case do not directly affect the exchange's business operations.
The market had already reacted to major news surrounding Binance and Zhao in November 2023, when allegations came to light and he stepped down as CEO. Accordingly, many market participants might have expected a harsher punishment for Zhao personally due to the magnitude of the charges. However, his actual sentence did not change the already existing situation at Binance.
Thus, Zhao's lenient sentence did not have a significant impact, since he no longer runs the exchange, and the main blow to Binance was dealt earlier. Market participants most likely focused more on the company’s new management and its future prospects for dealing with regulators.