Changpeng Zhao, the former chief executive of Binance, was sentenced on Tuesday to four months in prison after pleading guilty to violating US money-laundering laws at the world’s largest cryptocurrency exchange.

The sentence was imposed by United States District Judge Richard Jones in Seattle, who rejected prosecutors’ request that the 47-year-old Zhao serve a three-year term.

Once considered the most powerful person in the cryptocurrency industry, Zhao, known as “CZ,” is the second major crypto boss to be sentenced to prison after Sam Bankman-Fried. In March, Bankman-Fried received 25 years behind bars for stealing eight billion dollars from customers of his now-bankrupt FTX exchange.

Zhao pleaded guilty in November to one count of failing to take required anti-money-laundering measures and stepped down as Binance agreed to pay $4.3bn to settle related allegations.

US officials said Zhao deliberately looked the other way as people conducted transactions that supported child sex abuse, the illegal drug trade and “terrorism”.

“I failed here,” Zhao said before US District Judge Richard A Jones issued the sentence. “I deeply regret my failure, and I am sorry.”

“I believe the first step of taking responsibility is to fully recognise the mistakes. Here I failed to implement an adequate anti-money-laundering program … I realise now the seriousness of that mistake”, he said.

Prosecutors had told the judge a tough sentence would send a clear signal to other would-be criminals.

“We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster,” prosecutor Kevin Mosley said. But Zhao’s conduct, he said, “wasn’t a mistake. This wasn’t a regulatory ‘oops.’”

The three-year prison term prosecutors sought was more than twice the guideline range for the crime. If he did not receive time in custody for the offence, no one would, rendering the law toothless, they argued.

Zhao had been free on a $175m bond, and agreed not to appeal any sentence within federal guidelines. Zhao also paid $50m to the Commodity Futures Trading Commission.

Trades in violation of US sanctions

Binance allowed more than 1.5 million virtual currency trades, totalling nearly $900m, that violated US sanctions, including ones involving Hamas’s Qassam Brigades, al-Qaeda and Iran.

“He made a business decision that violating US law was the best way to attract users, build his company, and line his pockets,” the US Department of Justice wrote in a sentencing memorandum filed last week.

Zhao’s lawyers insisted he should receive no prison time at all, citing his willingness to come from the United Arab Emirates, where he and his family live, to the US to plead guilty, despite the UAE’s lack of an extradition treaty with the US.

No one has ever been sentenced to prison time for similar violations of the Bank Secrecy Act, defence lawyers Mark Bartlett and William Burck told the judge Tuesday, and Zhao began making changes to make Binance a model of compliance with banking transparency regulations before stepping down.

“There is no excuse for my failure to establish the necessary compliance controls at Binance,” Zhao wrote in a letter to the court. “I wish I could change that part of Binance’s story. But under my direction, Binance has now implemented the most stringent anti-money laundering controls of any non-US exchange, and those controls have been in place since 2022.”

Prosecutors said no one had ever violated the Bank Secrecy Act to the extent Zhao did.

“He says in hindsight he should have done a better job,” Justice Department lawyer Kevin Mosley told the court. “This wasn’t a mistake. When Mr Zhao violated the BSA he was well aware of the requirements.”

Zhao knew that Binance was required to institute anti-money-laundering protocols, but instead directed the company to disguise customers’ locations in the US to avoid complying with US law, prosecutors said.

Several other crypto moguls are also in the crosshairs of US authorities after the collapse of cryptocurrency prices in 2022 exposed fraud and misconduct across the industry.