Binance’s Zhao and FTX’s Bankman-Fried Commence Their Prison Sentences

Changpeng Zhao, founder of Binance, has begun a four-month sentence at Lompoc II, a low-security federal prison in California. 

This facility, located in Santa Barbara County, includes an adjacent satellite camp where inmates work on horse farms and spend time outdoors. Zhao, now designated inmate 88087-510, was initially expected to serve his sentence at the Seatac Federal Detention Center in Seattle. However, his status as a non-US citizen made him eligible for the less restrictive environment at Lompoc.

@Binance’s Changpeng Zhao (CZ) begins his prison sentence in California.
Meanwhile CT pic.twitter.com/VnIVPocD6b

— Karma 覚 (@iambhutia) June 4, 2024

Zhao, also known as CZ, is a prominent figure in the cryptocurrency industry. Since its inception in 2017, he has transformed Binance into a leading global crypto exchange. With an estimated net worth of $36.5 billion, Zhao is recognized as the wealthiest person to serve time in a US federal prison. 

Moreover, his sentence, shorter than the three years prosecutors had requested, stems from his failure to implement an adequate anti-money laundering (AML) program at Binance. This lapse allowed illicit actors, including terrorist groups such as al-Qaeda and ISIS, to trade Bitcoin on the platform.

Plea Agreement and Financial Penalties

In a plea agreement with the US government, Zhao admitted to the shortcomings of the AML program and voluntarily traveled from his residence in Dubai to Washington state to surrender. In addition to Zhao’s plea, Binance admitted to banking law and sanctions violations. The company agreed to pay $4.3 billion to settle the multi-agency investigation.

Sam Mangel, a prison consultant with clients at Lompoc, commented on Zhao’s placement, noting that his experience and knowledge in the crypto sector would likely make him a subject of interest among fellow inmates. Mangel expressed confidence that Zhao would adjust well to life at Lompoc.

FTX Co-Founder Sam Bankman-Fried’s Custody Status

Meanwhile, Sam Bankman-Fried, co-founder of the now-defunct FTX exchange, has been returned to the Metropolitan Detention Center (MDC) in Brooklyn, New York. This move follows his transportation to facilities in Oklahoma and Pennsylvania over the past month. 

Furthermore, the Bureau of Prisons website confirms Bankman-Fried’s current location, following Judge Lewis Kaplan’s request. The judge specified that Bankman-Fried should remain in New York until his appeal process is fully briefed to facilitate access to his appellate counsel.

Bankman-Fried was sentenced to 25 years in prison after being convicted on multiple counts of fraud related to FTX’s collapse. The exchange’s downfall had significant repercussions in the cryptocurrency market, leading to substantial financial losses for investors. Alongside Bankman-Fried, another FTX executive, Ryan Salame, received a sentence of 7.5 years for his involvement.

Legal Proceedings and Prison Movements

On May 23, Bankman-Fried was initially transferred to a facility in Oklahoma, appearing en route to a California prison near his parents’ residence. However, he was later moved to a prison in Pennsylvania before finally being returned to Brooklyn. Mark Botnick, a spokesperson for Bankman-Fried, acknowledged the Bureau of Prisons’ prompt handling of the situation.

The contrasting sentences and prison placements of Zhao and Bankman-Fried underscore the varying legal consequences faced by cryptocurrency leaders in the wake of regulatory scrutiny and legal actions. Zhao’s relatively brief sentence and placement in a minimum-security facility contrast sharply with Bankman-Fried’s lengthy sentence and the more challenging conditions at the MDC in Brooklyn.