US prosecution has appealed for 36 months (3 years) of imprisonment of Binance founder Changpeng Zhao for violating various US regulations. This battle has been going on for months, and Zhao was supposed to be sentenced by the end of February. However, due to delays over new appeals, the legal battle is continuing. Now, the final outcome is supposed to be out on the 30th of April.

This is not the first time an exchange has gotten into such situations. Earlier, Sam Bankman, the founder of the FTX exchange, was sentenced to 25 years of jail time for similar violations.

So, why is Changpeng Zhao in trouble now? Let’s discuss that in this blog.

Changpeng Zhao Pleads Guilty For Multiple Violations

Binance has gained huge popularity and a user base soon after its launch. It has the title of the biggest centralized cryptocurrency exchange with $20,808,472,743.64 in trading volume today. In 2021, the trading volume of Binance was more than the next four biggest exchanges combined.

With many promises of offering clean business and maintaining transparency, the exchange has been violating regulations. Many say the exchange was involved with fraud and violations shortly after its launch in 2017.

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In the ongoing legal battle, the Binance exchange along with Changpeng Zhao, has violated three important US regulations, which might result in a penalty of $50 Million and three years of imprisonment for Changpeng Zhao.

It is the result of the DOJ appeal for 36 months of imprisonment instead of the 18 months mentioned in the plea agreement.

Conducting Unlicensed Money Transmitting Business

Binance has been managing its business unlicenced, not only in the USA but in a few more countries as well. Initially, the exchange was based in China, but with the complete ban on cryptocurrency and crypto-related business, the exchange moved out of the country to Japan.

After shifting the exchange headquarters to Japan, the exchange was caught offering trade without a proper license. Later on, the exchange went on to continue their business in the USA without any license as well. All of this information was made public through an SEC filing.

This revelation is not new, as the US SEC and DOJ have been continuously investigating the Changpeng Zhao and the Binance exchange from 2020 onwards. Finally, Binance got sued in March 2023 by CFTC over evading US rules and operating in the US illegally.

Binance also compromised all these licensing-related regulations in countries like the UK, Japan, and Thailand.

Changpeng Zhao Violated The Sanctions

The US has the most strict rules & regulations against the finance and economic sectors. A personal chat between the two high-positioned Binance employees revealed that despite the continuous warnings, a part of Binance is still maintained from the USA without a license. A finance-related business must register itself as a money service business, which Binance has voluntarily ignored for years.

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Later in June, the SEC filed a lawsuit against the exchange over the undisclosed control of Binance US, where the company had misused the user funds. As a result, the company had to pay $4.3 Billion in November for various criminal charges and fines.

At that time, Changpeng had pleaded guilty to violating the anti-money laundering acts of the USA and resigned from the CEO position. With the $4.3 Billion fine, the company continued to run its operations.

Violating The Bank Secrecy Act

The Bank’s secrecy act talks about the mandatory implementations of the KYC (Know Your Customer) and money laundering programs, which the company has failed to adhere to. Being the biggest centralized exchange, the company was trading billions of dollars without the KYC. This is what brought up Changpeng Zhao in between all of this crisis.

For a similar reason of failure to comply with India’s PMLA law, Binance got banned on all web addresses and mobile application operations in India. The PMLA talks about the Prevention of Money Laundering Act in an attempt to regulate foreign investments in Indian banking assets. However, there are rumors of Binance’s return to India after a hefty fine.

Final Thoughts

In the last Tuesday hearing, the US prosecution suggested three years of imprisonment for Changpeng Zhao. The prosecutors highlighted the intensity of all the violations in the western district of Washington. However, the legal attorney of the Binance founder has appealed for no jail time. He mentioned of Zhao’s remorse for the violations and for paying all the fines. Also, the legal team mentioned that for more severity, Zhao could be punished with probation and home confinement.

The post 3 Reasons Why Changpeng Zhao Prison Can Be 3 Years Long appeared first on CoinGape.

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Filed under: News - @ January 1, 1970 12:00 am