Binance Founder CZ Released on Bail: An Overview of the Legal Developments
Changpeng Zhao (CZ), the founder of Binance, has been granted bail of $175 million and has agreed to return to the United States in anticipation of his sentencing on February 23, 2024. This move allows him to return to Dubai, where he has been residing, within 14 days after the sentencing.
CZ has pleaded guilty to violating the Bank Secrecy Act, facing a potential 18-month prison term. However, reports suggest that the prosecution is considering a longer sentence. CZ’s bail conditions require him to inform the court of his residence and risk an arrest order if he fails to appear in court.
Failure to appear carries a $250,000 fine and a maximum of 10 years in prison. CZ has placed $15 million in a trust account separate from his bail and has agreed to forfeit these funds if he violates bail conditions. The bail document also lists two guarantors contributing $250,000 and $100,000, respectively.
Binance acknowledged in a recent blog post that, during its early stages, the company lacked proper compliance controls. However, they stated that the agreement does not include any charges of illegal misappropriation of user funds or market manipulation.
The U.S. Department of Justice accused Binance and its top executives, including CZ, of taking steps to conceal violations of U.S. laws aimed at stopping the flow of illicit funds globally. The government alleges that from August 2017 to October 2022, Binance and CZ took intentional and calculated efforts to profit from the U.S. market without adhering to required regulations.
According to the indictment, Binance “chose not to comply with U.S. legislative and regulatory requirements, as it believed it would limit its ability to attract and retain U.S. users.”
Binance allegedly created loopholes allowing VIP clients from the U.S. to trade on the international exchange through offshore entities. Internal documents, chats, and phone call details were used by the government to demonstrate how Binance assisted VIP clients in bypassing IP address blocks.
