US President Donald Trump’s recent pardon of Binance co-founder Changpeng “CZ” Zhou has grabbed headlines. Some commentators hail the move as a way to “clear CZ’s record and allow him to return to the industry” — but this misses the point that a presidential pardon is not an erasure of guilt.
Judicial powers are, after all, only conferred upon the judiciary. Only a sitting judge holds the power and authority to overturn a conviction, acquit and restore innocence.
In CZ’s and Binance’s case, the shortcut to clemency came about — not through judicial exoneration — but through executive forgiveness, leaving the criminal record and its underlying wrongdoings in place. After all, only the guilty are entitled to a pardon.
The current situation is not the result of an appeal where, in a hypothetical deal, the Department of Justice can indicate consent to vacate the conviction. Had CZ pursued an appellate route, an impartial judge could have reviewed the uncontested case, with permission from the DOJ to vacate the verdict and clear his name in a procedurally sound fashion.
As such, by seeking and subsequently obtaining a pardon directly from the president (who is not a judge nor member of the judiciary), CZ’s and Binance’s legal team may have made a costly, irreversible strategic error, cementing his status as a federal convict and opening fresh avenues for civil liabilities.
Admission Cemented by Pardon
Criminal law recognizes that crime is not a victimless abstraction; it is the conviction of a societal wrong, an offense against the social order that results in practical harm to individuals or groups. In the regulatory and financial crime context, such victims are plentiful, ranging from those defrauded directly to those affected by broader illicit market misconduct.
With guilt confirmed, the public record becomes cemented: Wrongs were committed.
During the course of the prosecution, the CFTC’s investigation into Binance had provided a treasure trove of evidence, including wilful omission to implement meaningful KYC/AML controls, enabling funds to move for criminal use. By contrast, CFTC’s evidence suggests that Binance had guided clients to evade sanctions, and management had subsequently made “clean-up” efforts designed to conceal US users. With no appeal on vacatur, these admissions are now made incontrovertible.
This effectively supercharges the legal effect for prospective civil litigants; plaintiffs no longer need to prove elements of criminal liability, as the record of conviction is established, uncontested, and with appeal no longer an option. Thus, civil courts in tort, fraud and related actions may treat the criminal conviction (and the associated facts) as binding or at least of highly persuasive authority.
The law will thus recognize the right of those harmed, be it direct victims (who lost funds, security, or suffered from illicit facilitation such as purchase of weapons via illicit transaction) and indirect victims (those exposed to market, regulatory or circumstantial harms).
It is pertinent to note that whenever a crime is committed, it signifies a violation of rights, resulting in harm to society. The scope of these victims may be broad at times, especially in cases of financial or cyber fraud, thus indicating that criminal and civil proceeds should be allocated toward compensating victims.
The Floodgate of Exposure to Tortious Liability
At the heart of tort law are the corner legal principles established in the case of Ryland v Fletcher (principle of which subsequently absorbed into US Common Law), specifically whoever, in the pursuit of their own interests, brings or keeps on their property anything likely to harm if it escapes, will bear strict liability for its consequences. Such a “no-fault” standard requires only that the risk be foreseeable and harm did result from its escape.
According to the court’s record and what was disclosed, Binance’s internal chats and regulatory probes revealed that, allegedly, executives knowingly skirted regulatory requirements, which in turn facilitated illicit fund flows, tolerated and allowed sanctioned transactions and intentionally enabled risk-taking behaviors.
These admissions (crystallized by the earlier plea) satisfy both the traditional and modern senses of foreseeability, the linchpin of tortious claims under common law jurisdictions.
The True Scope of Exposure to Civil Liability
The consequences of the earlier guilty plea (and accompanying admissions), cemented by the subsequent conviction and unchallenged by an appeal on vacatur, reach deep into multiple layers of society and markets.
These exposures may include victims of terrorism and state-sponsored violence, such as the survivors and surviving family members of the Oct. 7 terror attacks and music festival tragedies, who already have ongoing civil suits alleging Binance’s intentionally lax controls and facilitation of illicit payments had enabled terror organizers to finance and execute such devastating attacks.
Alongside them, also included are victims of cyber scams and frauds, including consumers whose cryptocurrencies were either lost or laundered through Binance, even after regulators announced that such platforms were suspicious.
Finally, claimants seeking restitution through legal action, who demand the proper allocation of settlement proceeds to crime victims as mandated by law, will also be another potential prospect in the growing list of prospective claimants. The constellation of claims reveals not just isolated financial losses among victims, but a wider and cascading harm, each rooted in the facts of wrongdoings or omission, now amplified and made actionable through the cemented record of conviction, now out of reach of an appeal (given the pardon now in place).
The Pardon's Effect
The fact remains, a convicted person can no longer appeal after a pardon because a pardon is an executive act that forgives a crime and eliminates the remaining [criminal] punishment, and the acceptance of a pardon implies acceptance of guilt, so it negates the grounds for appeal, which are based on challenging the conviction itself. Thus, each of these groups of victims finds their rights and remedies bolstered by incontrovertible admissions, cemented by conviction and pardon, which in turn open a plausible path for recovery that could reshape Binance’s and their ecosystem’s risk profile and the future of restitution in crypto-related wrongs.
By accepting a pardon, CZ effectively foregoes the judicial process that can remove or contest the proven criminality.
The Price of Certainty's Uncertainty
The immediate reaction to CZ’s presidential pardon was, undoubtedly, a sudden, sharp surge in BNB’s price, reflecting their intricate relationship. Speculators celebrated the removal of the criminal overhang and anticipated a period of regulatory relief for Binance, with optimism further fueled by the belief that the brand’s founder could return to public leadership and move the business back to the “good old days” way.
Yet, this rally may prove fragile when set against the backdrop of unresolved civil liabilities, reputation risks (going beyond the borders of the US, which may, on one hand, rely on findings of CFTC and on the other, give little positive weight to the pardon).
While the pardon does eliminate criminal sentencing, it nevertheless cements CZ’s conviction, reaffirming the actual occurrence of the wrongdoing, which may in turn open the floodgates to a wave of civil claims.
Furthermore, a US presidential pardon has no legal effect outside the borders of the US and does not shield an individual from prosecution in other countries or under international law. Other jurisdictions retain the right to use CFTC’s evidence, investigate or prosecute the same underlying conduct if their laws were violated or if acts constitute an international crime, meaning the pardoned can still face legal consequences abroad regardless of their status in the US.
For holders of BNB, the central risk is that the surging legal costs, assets now available for seizure across various jurisdictions, reputation impact and potential regulatory exclusion could shift Binance’s disposition suddenly and rapidly. Were such threats to ever materialize, they could result in downward pressure on BNB and nullify any interim gains sparked by the news of clemency, with volatility becoming the norm as markets struggle to price in shifting headlines.
Opinion by: Joshua Chu, co-chair of the Hong Kong Web3 Association.