$33 Billionaire C.Z. Gets 4 Months | ‘Bitcoin Jesus’ Arrested On Tax Charges

C.Z., as he is known, is getting a slap on the wrist when measured against frenemy Sam Bankman-Fried, who fought the charges against him and was convicted on seven counts of fraud and conspiracy in connection with the failure of his FTX crypto exchange. SBF was sentenced to 25 years and ordered to forfeit $11 billion, which gives him little or nothing to show for his rapid rise and fall. Bankman-Fried has appealed his conviction and sentence. Prosecutors had sought three years for Zhao, the New York Times reported. 

Lighter though his sentence might be, C.Z. will not be staying at Club Fed. His surrender date is not yet set, and it is up to the federal Bureau of Prisons where he will serve his sentence, but Judge Richard Jones recommended the SeaTac federal detention center, near the airport that serves Seattle and Tacoma. Zhao’s lawyers have contended he would not be safe in prison, and he is not eligible for a minimum-security facility because he is not an American citizen. SeaTac is considered an administrative-security prison outside the minimum-low-medium-high spectrum. The Seattle Times reported in January that SeaTac was severely understaffed, with half of its key positions unfilled. 

After being sentenced, C.Z. posted on X:  “I will do my time, conclude this phase and focus on the next chapter of my life (education).” He said he would remain a passive crypto investor, and that in the digital-assets world of 2024 “Compliance is super important.”

Prosecutors allege that by February 4, 2014 Ver and two companies he owned (MemoryDealers.com and Agilestar.com) had amassed 131,000 bitcoins--at the time each worth about $871, or a total $114 million--and that a law firm Ver hired filed false tax returns that substantially undervalued the two businesses and the 73,000 bitcoins MemoryDealers and Agilestar owned. The return allegedly also failed to report any of the tokens Ver held personally. An indictment unsealed last week says that Ver took possession of about 70,000 of the bitcoins from companies and sold “tens of thousands” of the tokens on crypto exchanges for about $240 million in November 2017 without reporting any of the transactions on his individual tax return for that year—costing the U.S. about $48 million. 

Bryan C. Skarlatos of the Kostelanetz law firm, who represents Ver, told Forbes: “This prosecution never should've been brought. Mr. Ver relied on leading tax professionals to help him report his Bitcoin and he always intended to fully comply with his U.S. tax obligations. We look forward to establishing his innocence in court, if necessary.” A Justice Department statement said the U.S. plans to seek Ver’s extradition.

How did the SEC approach the industry? 
The SEC is technology-neutral...Also, there's no systematic plan at the SEC to kill crypto or drive crypto projects out of the U.S. I know there's a lot of talk about that. There are a lot of theories, but that's not what I observed during my time there. What I did see was a true concern that the lack of compliance within the crypto industry was bad for investors. 

How does the SEC decide between going after potential token issuers like Ripple and Telegram and what now seems to be a focus on exchanges?
Some of that is natural evolution. You do a number of cases against issuers, and then you think, what's the next step? What's the next way in which investors may be harmed and that we can move to try to protect investors? That happens in any kind of enforcement regime. The first wave of enforcement cases by the SEC was largely against issuers like Telegram, Kik, Ripple and LBRY, and then the focus in 2022 shifted to intermediaries. 

What are your thoughts about decentralized finance (DeFi) and decentralized autonomous organizations (DAOs) that have governance tokens, even if they’re focused on an investment club or something unrelated to lending or trading?
DeFi may be the next frontier for the SEC’s enforcement focus. I think how the SEC views DeFi and DAOs and anything that purports to be decentralized is to ask if they are in fact decentralized…or is there someone out there running it? Is the DAO truly a decentralized autonomous organization? 

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