Richest Prisoner: $43bn worth Changpeng Zhao will see his wealth grow from jail

It’s “better to ask for forgiveness than permission” when it comes to complying with the law, the billionaire founder of the Binance cryptocurrency exchange once told his team, according to the US government.

On Tuesday it was time for Changpeng “CZ” Zhao to ask for forgiveness, yet prosecutors weren’t exactly in the mood to grant it. In a court filing before his sentencing hearing, they cited the flippant attitude on display in this and other remarks as one of the reasons they recommended the court give him three years in prison — longer than what guidelines prescribe — following his guilty plea to violating anti-money laundering laws in November.

Richest US Prisoner Ever

Seattle Judge Richard Jones wasn’t convinced he deserved that much time, instead giving him four months in prison. Still, Zhao will enter the history books as the richest person ever to do time in US federal lockup since his ownership of Binance — and an estimated $43 billion personal fortune tied to it — remain intact. His wealth is likely to grow even bigger as Binance’s business accelerates amid crypto’s latest bull run. And despite relinquishing the chief executive title as part of his deal with the government, Zhao’s lingering influence on the company is hard to miss: Its new board of directors is dominated by his devoted friends, and the mother of three of his children plays a major role in running its operations.

Needless to say, the arrangement with the Department of Justice doesn’t sit well with some critics of the cryptocurrency market.

“The DOJ should have charged dozens of people connected to Binance and should have not only prosecuted them and punished them but barred them from the financial industry forever,” said Dennis Kelleher, president and CEO of the advocacy group Better Markets Inc. “If you’re not going to punish the others, he deserves the most-severe sanction possible.”Read More: Binance Founder Changpeng Zhao Gets Four Months in Prison

Zhao also agreed to pay a $50 million personal fine. Binance itself agreed to $4.3 billion in penalties to settle a case that involved a litany of alarming allegations linked to violations of anti-money laundering and sanctions laws, including assertations from the US Treasury that the exchange failed to prevent and report suspicious trading by Hamas, Al Qaeda and other groups designated by the US as terrorist organizations. US Attorney Tessa M. Gorman and her fellow prosecutors cited the “massive” ramifications from Zhao’s misconduct and what she called “significant harm to US national security” in asking for three years imprisonment.

Yet despite the gravity of the allegations and the admissions of guilt by Binance and its former leader, the company Zhao built continues to thrive and its status as the most-important crypto exchange has survived it all. The business, which earns fees from customers’ trades, tends to be a money-printing machine during crypto boom times like this one, with Bitcoin reaching record highs last month as investors return in droves to the market following the launch of US exchange-traded funds investing directly in the original cryptocurrency.

While its dominance has slipped a bit, Binance has maintained its market-share leadership in combined spot and derivatives crypto markets. The company said it added more than 40 million new users in 2023, up 30% from the prior year. Customers’ holdings on the exchange have swollen to more than $100 billion. The company likely made $9.8 billion in annualized revenue in the 12 months through March, according to Bloomberg estimates.

“It’s really the ETFs and whatnot that are helping drive a lot of this activity,” Andy Goldin, global head of data and analytics at Binance, said in an interview in March. “It’s really fueled by more institutional trading activity at this point.”

Point of Difference from FTX

Binance’s perseverance is in large part because traders view the company and Zhao very differently than they do its onetime bitter rival FTX, which went bankrupt after founder Sam Bankman-Fried illegally misappropriated billions of dollars worth of users’ cryptocurrencies. Following his conviction, Bankman-Fried received a 25-year sentence, and his net worth is currently estimated at $0. Among the crimes that the DOJ charged Binance with, duping customers about the use of their funds wasn’t one of them.

The divergent outcomes for Bankman-Fried and Zhao reflect the pair’s dramatically different styles of doing business. After his crypto empire collapsed, Bankman-Fried embarked on a chaotic effort to talk and tweet his way out of trouble, even a failed attempt to testify in his own defense at his trial. On the other hand, Zhao admitted his guilt, cooperated with the government and kept his mouth shut. Even their trademark hairstyles offer a symbolic view of the contrast: Bankman-Fried was famous for his long, unruly tangle of curls, while Zhao sports a buzz cut that would look at home at a boot camp.

And most importantly, unlike FTX, Binance has been able to handle the impulses of hot-money crypto traders, who tend to yank their funds from exchanges at any hint of trouble, such as the collapse of the Terra UST stablecoin and bankruptcy of Three Arrows Capital hedge fund in 2022, not to mention Binance’s own legal entanglements last year.

“Binance was the biggest exchange and operated well throughout the failures of FTX, 3AC, Terraform Labs, and more,” said Austin Campbell, an adjunct professor at Columbia Business School and a consultant for blockchain firms. “The US government’s action was seen as a big overhang, and since they will survive it, it gives people confidence in them.”

How much things have actually changed inside Binance since the plea agreement that ousted Zhao is the subject of much watercooler talk in the crypto world.

The most obvious change is that Zhao has relinquished his role as the public face of the company. While he was never the type to rub elbows with celebrities or invite reporters into his home, the way FTX’s Bankman-Fried did at his lavish Bahamas penthouse, Zhao has gotten so low-key since his guilty plea that he’s practically been invisible. Gone are the days when he pitched his exchange in interviews on financial-news television stations, podcasts and panel discussions at conferences, or mixed it up with foes and fans on social media.

Filling much of the void is Yi He, the mother of three of his children and one of the co-founders of Binance.