CZ's four-month prison sentence sparks mixed early reactions

Moments after the news dropped that former Binance CEO Changpeng Zhao, a.k.a. CZ, would be serving four months in federal prison for anti-money laundering violations, two things happened.

First, with a fortune valued over $40 billion, CZ is set to become the richest person to ever serve time in a federal prison in the U.S., according to Bloomberg. Second, the internet lit up with reactions to news a man responsible for helping to build the largest cryptocurrency exchange in the world will be incarcerated.

Former Binance colleague Patrick Hillmann joined the chorus of supportive voices.

"I witnessed first hand as CZ rebuilt the executive team around him in 2021 to prepare Binance to be regulated at the global level," the former chief strategy officer at Binance posted to X. "Judge Jones handed down a just sentence given the gravity of both CZ's missteps and his attempts to correct past mistakes."

CZ apologized during the sentencing hearing on Tuesday, saying wanted to take responsibility for his "mistakes." Prosecutors wanted a more severe punishment of 36 months for Zhao, based partly on the allegation that his exchange targeted U.S. users and purposefully violated the nation's laws.

Federal sentencing guidelines call for a range of 10 to 16 months for a first-time nonviolent offender, Braden Perry told The Block. Perry is a partner at Kennyhertz Perry and a former federal enforcement attorney.

Precedent was the biggest factor in Tuesday's sentencing and judges usually don’t like to deviate from it, Perry said.

“Here, the alleged crime and the fact that CZ was a first-time nonviolent offender all led the judge to analyze what other sentences similarly situated individuals have received,” Perry said. “As the defense noted, most, if not all, had previously received no prison time."

Others not so pleased

The billionaire pioneer of the crypto world heading to jail makes for the second high-profile CEO in the space that has been ordered this year to spend time in prison. CZ's one-time archrival, former FTX CEO Sam Bankman-Fried, in March was sentenced to 25 years in prison.

Better Markets CEO Dennis Kelleher had a negative reaction to Tuesday's proceedings, calling the sentencing an "egregious miscarriage of justice," in a post on Tuesday.

"'Crime pays' is the message sent today not by the judge but by the DOJ’s weak, minimalist sweet deal with Binance’s former CEO, CZ," he added.

Although displeased with the four-month sentence, Kelleher also said the judge in the case was "boxed in" because the U.S. Department of Justice "merely charged" CZ with not having properly implemented an anti-money laundering program, opposed to charging the former CEO with money laundering.

"While the DOJ just didn't have enough goods on CZ to warrant three years, I can't believe CZ is getting four months and not 18 months," said Managing Director at Swan Bitcoin Terrence Yang in a statement. "The judge listed a bunch of mitigating factors, believing CZ worked hard, is a family man and had many letters including from folks who knew him a long time. Of course he did. He's a decabillonaire."

Likely to serve all 4 months

For anyone expecting CZ might be able to cut his sentence short with good behavior, at least one expert doesn't believe that will be the case.

"It appears CZ will not benefit from any earned time credit programs, and he is expected to serve the full 120 days in federal prison," said Sam Mangel, who works as a federal prison consultant. "CZ will serve his time in a low-security facility rather than a minimum-security prison camp that would be made available in comparable cases and sentences. This is because CZ is not an American citizen. Though he’ll be uncomfortable, I believe Zhao will be safe and will not be extorted or be in danger."

UPDATED to reflect that Zhao pleaded guilty to anti-money laundering violations and will serve four months due to that guilty plea.