| In a federal courtroom in Seattle on Tuesday, Changpeng Zhao, the founder and former chief executive officer of Binance, stood up and apologized. Zhao, commonly known as CZ, said he was sorry for violating the bank secrecy act. His company, the world's largest crypto exchange, had failed to do enough to stop money laundering, which federal investigators said resulted in Binance's funneling money to a long list of criminals and bad actors. Zhao didn't admit to knowing about this, but federal investigators say that his company facilitated payments to ransomware operators in North Korea who'd hacked US hospitals and schools, as well as crypto scammers, child pornographers, Iranian government officials and basically every terrorist organization you've heard of. That was all an unwitting "mistake," according to Zhao's lawyers, which he regrets deeply. He's done a lot of thinking and reflecting, he said, and dedicated himself to philanthropy. As Bloomberg's Ava Benny-Morrison reported from the courtroom, Zhao said he pleaded guilty "because responsibility is a core value for me, and I live by that." Judge Richard Jones seemed at least somewhat convinced, declaring that Zhao appeared to have learned his lesson and that he seemed like a good person. Judge Jones sentenced the crypto mogul to four months in prison.  Zhao (center) after sentencing on Tuesday. Photographer: David Ryder/Bloomberg This was much less than the three years prosecutors had requested. The judge explained that Zhao's willingness to turn himself in worked in his favor. When he was charged, Zhao was living in Dubai, which has no extradition treaty with the US. He probably could have evaded arrest or chosen to fight the charges from abroad. Instead he flew to the US and appeared in court. (Another possible, though unstated, reason for the leniency could be that Zhao is cooperating with federal authorities on other criminal matters. A lot of bad people were using Binance, and it's conceivable, if not likely, that Zhao is or has been helpful in investigating them.) No matter the crime or the circumstance of his case, federal prison time is nothing to sniff at, and this is the first time a CEO has gone to prison for this particular crime. In settling with the government, Zhao also agreed to pay a $50 million fine and give up his role at the company. Binance pleaded guilty to more serious allegations, admitting to allowing terrorist groups to trade crypto on its platform, and agreed to pay $4.3 billion. In doing so, the company was forced to at least tacitly admit what critics, former employees, government officials and competitors have been saying for years: The exchange treated compliance as basically optional and failed to take responsibility for the ways customers used it. Zhao long insisted, essentially, that Binance had no obligation to follow normal banking regulations, because Binance wasn't based in any country. Anyone who suggested this was problematic was doing so for selfish reasons. Journalists who reported critically on the company were routinely mocked, threatened or sued. In recent years, Zhao has said that criticism of Binance was either unfair or a reflection of a company that had long ago turned over a new leaf. In 2022, I flew to Dubai to write about his efforts to get serious about compliance. He told me that within an industry notorious for fraud, scams and wild speculation, Binance employees were playing the role of "the adults in the room, basically." "Basically" was doing a lot of work in that sentence. Zhao had claimed to be putting down roots in the Middle East because he wanted to work closely with regulators. What I found was a company that barely had an office and seemed to be making only the most comically half-hearted gestures toward behaving normally. In our Businessweek cover story, Justina Lee and I wrote that Binance was "following a path popular among tech disrupters, including Airbnb, Uber and PayPal: Ignore the demands of governments for as long as possible. Then, when you're big enough, work with said governments to lock in market share."
Tuesday's verdict may represent justice, but it's also a vindication of that cynical strategy. Zhao, as prosecutors said, had told employees not to worry about compliance, because it was "better to ask forgiveness than ask permission." In court, Zhao asked for forgiveness, which was more or less granted. As Bloomberg News' Olga Kharif and Muyao Shen reported this week, he'll serve his time as the wealthiest federal inmate in history. The charges against Binance, and even the admission of being complicit in terrorist funding, have done almost nothing to dent the company's prospects or dominance. Now run jointly by a former deputy and the mother of some of Zhao's children, Binance will pull in close to $10 billion a year in revenue, according to Bloomberg's estimates. Zhao's net worth: $43 billion. Forgiveness is better, indeed. —Max Chafkin, Bloomberg Businessweek | 
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