Binance's Former CEO, Changpeng Zhao (CZ), is embroiled in a contentious debate with the US Department of Justice (DOJ) following his guilty plea for violating anti-money laundering laws in the US.
Although the DOJ is not advocating immediate incarceration, it has opposed CZ's departure from the United States, Coindesk reported. The Justice Department has cited him as a "flight risk that could be managed." This stance has arisen despite CZ's voluntary appearance in court, where he argued that his presence is proof of non-flight tendencies.
CZ's counsel has highlighted his voluntary self-surrender, intent to resolve the case, and a proposal for a significant bail package. However, US Attorneys contend that the severity of potential sentencing could force him to flee back to the UAE, his primary citizenship, which lacks an extradition treaty with the US.
Changpeng Zhao Staring at a Possible 10-Year Prison Term
The looming prison sentence is potentially between 18 months to a statutory maximum of 10 years. Following his guilty plea for money laundering violations, CZ stepped down as Binance's CEO.
Simultaneously, Binance pleaded guilty to multiple criminal and civil charges, agreeing to pay a substantial $4.3 billion in penalties. Besides that, CZ signed a hefty bond agreement worth $175 million after pleading guilty to violating the Bank Secrecy Act, Reuters reported. The US prosecutors have argued that he might opt to stay in the UAE with his family instead of facing prison time in the US.
Following Zhao's guilty plea, Binance struck a deal with the DOJ to exit the US market and to appoint a new CEO. In the midst of this legal turmoil, Binance witnessed a substantial outflow of its Bitcoin reserves.
Impact of Legal Challenges on Binance
Recent data from CryptoQuant unveiled that the crypto exchange witnessed a decrease of 5,000 BTC in reserves. This is in contrast to rival crypto exchange, Coinbase, which recorded an increase of approximately 12,000 BTC in the same period.
Following Changpeng Zhao's resignation and admission of guilt, Binance faced outflows exceeding $1 billion within a day. This departure was accompanied by a decrease of 25% in market liquidity , indicating the impact of market makers reducing their positions in response to the legal turmoil. Additionally, Binance's native token, BNB, experienced a decline of 8% on the settlement day.
