Thread by @nikhileshde

Good morning folks. I'm in a Seattle courthouse today with @realDannyNelson covering @cz_binance's sentencing hearing. The DOJ's asked for 3 years in prison; defense has asked for house arrest and probation. Thread starts here

coindesk.com/policy/2024/04…

@realDannyNelson @cz_binance CZ just walked in, wearing what looks like a deep blue suit and sporting his trademark buzzcut. Both teams of attorneys are also present; hearing is scheduled to kick off at 9am PT

This hearing has been delayed to 9:30am PT

We're still waiting for the judge, but in the meantime: Courtroom isn't quite standing room only, but it's pretty packed. Five people at each table (defense and DOJ), plus a few other personnel sitting by. Somewhat different vibe than during SBF's sentencing

Five + CZ at the defense table, I should say

Correction: CZ's team didn't ask for house arrest, just proposed it as an option. Actual ask is for probation

Proceedings kicked off at 9:39 a.m. PT. DOJ and defense tables introduced themselves. Judge starting off by saying he's reviewed sentencing submission, said he's "reviewed all docketed items"

Judge Richard Jones said he does not agree with the DOJ's request for an enhancement to the sentencing guidelines that would push the sentence from 18 months to 3 years: “There’s no evidence that the defendant was ever informed” of illegal activity.

DOJ attorney arguing that judge should be able to infer CZ was aware of illicit activity, citing a previous case where a judge inferred a defendant knew of illicit activity.

"Given that inference is in that case a part or a function of how the court came to that conclusion, we argue that supports a similar finding here."

Judge Jones: "The bottom line, the case authority is not clear," there's no clear circuit court record, "I'd also like to commend [Probation Office]" for their "comprehensive" report. Now talking through baseline calculation

Judge Jones largely agrees with Probation Office. Total level is 12, which would lead to a 10-16 month prison term and 1-3 years supervised release. Now going to hear from DOJ, defense and CZ before final ruling

To be clear, the judge rejected the DOJ's push for an enhancement; DOJ now up

DOJ attorney: CZ deliberately tried to tap U.S. financial system. "Violating the law was integral to that endeavor; we're not guessing here, Mr Zhao said that himself - ask for forgiveness, not permission"

CZ deserves credit for coming in but that credit's reflected in plea agreement, DOJ attorney says

"If Mr. Zhao does not face incarceration after deliberately and willfully planning to violate U.S. law to build the largest crypto exchange in the world and get rich in the process … then no one will face incarceration and the BSA will for intents and purposes be a dead letter"

"We are not suggesting that Mr. Zhao is Sam Bankman-Fried or that he is a monster" - DOJ attorney, adds their recommendation is not about CZ as a person

"Mr. Zhao and Binance did encourage compliance enhancements but this was after Binance got caught ... this is what you're supposed to do ... it's commendable but it does not merit a probation sentence here" - DOJ atty

"[CZ] chose to avail himself of the U.S. financial system," DOJ atty says

"A probationary sentence here will incentivize others to break the law and to do it in the largest scale possible," DOJ atty says before final urge for a "meaningful" sentence of incarceration

Judge: Your recommendation is 2x sentencing guidelines; would that not lead to sentencing disparity?

DOJ: No single defendant has been responsible for so much; "We don't believe it would be a sentencing disparity ... the disparity is in the magnitude of the conduct"

The judge continues to seem very skeptical of the DOJ's arguments for a longer sentence, asking for specific authorities and other questions.

DOJ atty continues to say that sentence must reflect magnitude of offense

The judge continues to seem very skeptical of the DOJ's arguments for a longer sentence, asking for specific authorities and other questions.

DOJ atty continues to say that sentence must reflect magnitude of offense

Probation officer reiterated 5 month recommendation, said if not incarceration, home arrest should be in USA

A different defense atty now up, says CZ's mother, son, nephew and sister are in attendance. Points to letters of support, CZ came to US. Contrasts with another case where a defendant spent 4.5 years fighting extradition: "[CZ] didn't do that. He chose to come here."

Defense atty continues to espouse CZ's cooperation, which was "well documented," says he directed Binance to cooperate

Judge now asking defense atty questions, including verifying that CZ will benefit from continued ownership of Binance

Defense says he's not controlling it

All factors support a downward variance (a lighter sentence), defense says

Judge: Probation still recommends 5 months, would you agree?

Defense: I agree, but I think probation said 5 months and then listed 6 factors that you might consider to reduce that

Defense atty now talking about his personal view of CZ

CZ himself is just kind of staring. Glancing around occasionally. He's supposed to speak at some point, but first a different defense atty will take the lecturn

CZ himself is just kind of staring. Glancing around occasionally. He's supposed to speak at some point, but first a different defense atty will take the lectern

New atty says there's no cases with similar circumstances where defendant was incarcerated; points to Arthur Hayes' sentence a few years back

We've been on a lengthy-ish back-and-forth about precedents and Binance's own history; judge asked whether defense was suggesting Binance implemented KYC/AML absent law enforcement involvement; defense says it was at least "long before" the settlement

Defense back to noting CZ came to US voluntarily, instead of staying in UAE (DOJ previously said that's commendable but alternative is CZ possibly being a fugitive)

Defense just referenced a sealed document but judge said he doesn't need to continue talking about it; we're recessing until 11:30 and then CZ will get a chance to speak

We're back. Judge admonished someone for taking a photo and tweeting it

CZ is now up: "The first step to taking responsibility is to fully recognize the mistakes." Says he failed to set up a KYC/AML program at Binance but that he's tried to rectify that, directed Binance to cooperate with US govt

"I also recognize the importance of having a robust KYC/AML program," CZ says

"Everything I see about you and your characteristics are of a mitigating nature," the judge says to CZ as he begins to read through his order

The court also looks into the fact that you took significant steps and extraordinary steps to cooperate with law enforcement, the judge says

You were the CEO of Binance. You made decisions, judge says
Again the court goes to your failure and responsibility to maintain a proper anti-money laundering program that created potential for a significant impact on money laundering ... that includes drug trafficking, terrorism

Next the court looks at the need to support respect for the law, importance of sending a message judge says

Judge is continuing to walk through the various factors and considerations. Court says no period of supervision

Judge says $50 million fine has been satisfied. Getting to actual sentence now

Judge says he read every single letter (161) filed because it's "important to know who you are"

"I don't think I've ever seen this volume of letters, not just from family, but from people who have known you a long time"

The letters paint a picture of a man driven by your motivation, passion, drive, judge says: "You risked your entire net worth" to make Binance succeed.

"It's also clear from the letters that you're a dedicated family man," cites Binance Charity

"The background letters reference the fast rise of binance ... your hard work and vision," binance processing $500 million in daily volume (I think). "That's extraordinary," judge says, adds "exceptional responsibility" CZ took

CZ had the personnel, resources and "wherewithal" to comply with US regs, but he "failed ... at that opportunity," judge says

"The report shows that billions' worth of bitcoin were directly sent" to darknet markets etc, judge says. "I was deeply troubled in the materials submitted by the parties that include reference to your statement ... 'it was better to ask forgiveness than permission'"

"You have the ability and will to rehabilitate because of this tough lesson," judge says, is now getting to the actual sentencing i think

Judge again rejects 36 month request by DOJ

"There needs to be an effort by this court to impose a sentence that's appropriate and reasonable" judge says

Judge says he won't follow 5 month probation recommendation. Lands at 4 months

https://twitter.com/nikhileshde/status/1785383500021125617

Quick recess now for defense to confer on report date

CZ and defense team walked back in a few min ago, court back in session.

Defense atty: We request expedited designation but letting probation office choose reporting date

Judge asks CZ if he swears to show up on whatever the reporting date is. CZ says yes

Earlier a defense atty called a subsidiary of Binance main. Atty now asked if he could "correct the record, it's not a subsidiary"Binance.US

And we are done with the sentencing hearing

And here's the paperwork. Judge sentenced 4 months, recommends FDC SeaTac, CZ to surrender himself at a date TBD by Probation/Pretrial Services Office storage.courtlistener.com/recap/gov.usco…

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