Defendants often face a tough choice — challenge the government’s evidence and if convicted, face significant jail time. On the flip side, defendants who plead guilty and cooperate can earn significant sentencing reductions, even avoiding any jail time.
The contrast between cooperating and non-cooperating defendants can be very stark.
Samuel Bankman-Fried or “SBF” was convicted after a lengthy trial. He was convicted of a massive cryptocurrency fraud resulting in the theft of over $11 billion (with a B). In the end SBF was sentenced to 25 years imprisonment and forfeiture of $11 billion in assets.
Now consider the case of Binance founded Changpeng Zhao (“CZ”), who plead guilty early in the federal case against Binance and cooperated with prosecutors. Binance was the world’s largest cryptocurrency exchange until federal prosecutors targeted Binance for pervasive BSA/AML regulatory failures. The underlying facvts demonstrated that CZ and others at Binance knowingly and deliberately ignored BSA/AML regulatory requirements in favor of collecting large sums of cryptocurrency exchange revenues.
Recently, U.S. District Judge Richard A. Jones sentenced CZ to four months in prison and rejected DOJ’s recommendation that CZ receive a three-year sentence of imprisonment. Judge jones specifically noted that he was disturbed that CZ told members of his Binance team that it was “better to ask forgiveness than permission” when it came to compliance.
In rejecting the government’s sentencing recommendation, Judge Jones noted the outpouring of support for CZ in the filing of more than 160 letters that cited CZ’s history and strong character.
In November 2023, Binance and CZ agreed to pay a $4.3 billion fine to end a long, multi-year investigation and plead guilty to BSA violations and failure to register as a money-transmitting business. As part of the plea agreement, CZ resigned from Binance and gave up control of the company for 3 years. He agreed to pay a $50 million fine in exchange for his guilty plea to one count of failure to maintain an effective AML program. CZ retained much of his fortune, which is estimated to total over $30 billion.
So, on one side of the equation is CZ and the other is SBF — one gets 4 months’ imprisonment and the other gets 25 years imprisonment. While part of the explanation for this different treatment may be the massive numbers of victims who lost so much money as a result of SBF’s massive fraud.
On the other hand, CZ’s failure to abide by BSA/AML laws and regulations resulted in the promotion and financing of criminal and terrorist schemes through the processing of suspicious cryptocurrency transactions. The “victims” may not have been as evident but CZ’s conduct resulted in serious harm to innocent individuals and organizations by undermining national security interests.
CZ was able to plead guilty to a single count of a BSA/AML failure. He could have been required to plead to a large number of serious charges but he was able to negotiate a relatively light plea agreement. If CZ had chosen to force the government to charge and try him, the government would have indicted CZ with more serious charges. Such a development would have increased CZ’s exposure.
Further, CZ’s and Binance’s cooperation has provided the government access to financial information that the government may use to uncover significant illicit schemes.
In the end, the key distinction between SBF and CZ’s treatment appears to be the significant reward for pleading guilty and cooperation. Defendants who decide to cooperate can often avoid significant penalties. SBF did not cooperate and instead chose to challenge his prosecution. CZ did not and cooperated. The difference between their sentences is an important indicator of just how important cooperation is when white collar defendants are sentenced.
