Austin Campbell, an adjunct professor at Columbia Business School and former chief risk officer at Paxos, expressed to Federal Newswire that the potential imprisonment of Changpeng Zhao (CZ), co-founder and former CEO of cryptocurrency exchange Binance, for over a year could prompt inquiries as to why traditional bank executives have not been incarcerated for similar offenses. Campbell highlighted that despite both CZ and Sam Bankman-Fried, founder and former CEO of crypto exchange FTX, facing criminal sentences, their cases are distinctly different.
"To that end, if you compare it with most of the settlements around controls failures for banks, I think this is a pretty fair outcome", said Austin Campbell. "Remind me again, after all, which bank executives are in jail for the many, many AML/KYC [anti-money laundering/know your customer] failures that plagued that industry? CZ getting 0-12 months is probably in line, and I think the danger of hitting him with far more re: regulators is next time you're probably going to have to throw Jamie Dimon or Jane Fraser in jail or you're going to be faced with a lot of very unpalatable questions when they have controls issues at their banks. I know because they are both in crypto, there's a lot of wanting to equate this to SBF [Sam Bankman-Fried], but straight up defrauding your customers and stealing the money is very different than just having a janky and poorly constructed ship from a controls perspective."
In November, Binance announced that it had reached a resolution with multiple U.S. government agencies concerning the exchange's historical compliance issues. The company's post stated that the settlements "acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth." Binance stressed that the government did not allege misuse of customers' funds or market manipulation by the company. As part of this settlement, CZ agreed to resign from his CEO position and was succeeded by Richard Teng, Binance's former global head of regional markets.
According to CNBC, CZ also consented to plead guilty to failing to maintain adequate Anti-Money Laundering (AML) protocols at Binance. His sentencing is slated for April 30. Although federal sentencing guidelines recommend a maximum of 18 months in jail, reports suggest prosecutors may seek a harsher penalty.
A violation tracker maintained by Good Jobs First reveals that major traditional banks such as JP Morgan Chase and Citigroup have incurred penalties totaling $286 billion for financial violations since 2000. The tracker identifies Bank of America as the top offender with $41.3 billion in penalties for 155 violations. These violations include economic sanction breaches and AML deficiencies.
Enzuzo reported that under CEO Jamie Dimon's leadership, JP Morgan Chase received a fine of $920 million in 2020 due to trading violations and deceptive behavior. HSBC and Standard Chartered Bank have both been fined over $1 billion for AML regulation violations. Specifically, HSBC's $1.9 billion fine in 2012 was related to the bank knowingly allowing Mexican drug cartels to launder $881 million through its services.
Campbell, according to his LinkedIn profile, is the founder and managing partner of Zero Knowledge Consulting. He currently serves as an adjunct professor at Columbia Business School where he instructs on blockchain markets infrastructure. Campbell's previous roles include chief risk officer and head of portfolio management at Paxos, as well as head of stable value products at Global Rates Trading.
