The founder and former CEO of cryptocurrency exchange Binance, was sentenced to four months in prison on Tuesday for violating US money laundering laws and failing to comply with sanctions, including those against Iran.

The investigation revealed that Binance allowed more than 1.5 million virtual currency trades worth around $900 million, violating US sanctions. These included transactions involving Iran and designated terror groups such as Iran-backed Hamas, al-Qaeda and Islamic State.

Prosecutors said Binance employed a "Wild West" model that welcomed criminals, and did not report more than 100,000 suspicious transactions.

Families of victims of the Hamas terror attacks of October 7 and the families of hostages taken to Gaza, are suing Binance, along with Iran and Syria, for Binance's role in funding the terror group, among others between 2017 and 2023.

Once considered a leading figure in the cryptocurrency world, Changpeng Zhao's sentencing marks him as the second major cryptocurrency executive to face prison time after Sam Bankman-Fried for his role in the FTX scandal.

Presiding US District Judge Richard Jones in Seattle delivered a sentence that fell significantly below the three years requested by federal prosecutors, and well under the maximum of 1-1/2 years recommended by federal guidelines.

Binance was also found to have facilitated transactions involving the sale of child sexual abuse materials and processed substantial sums from ransomware attacks.

In addition to the prison term, Binance has agreed to a $4.32 billion penalty to settle the charges, while Zhao himself has paid a $50 million criminal fine and another $50 million to the US Commodity Futures Trading Commission.

Zhao stepped down as Binance's chief in November, when he and the exchange he founded in 2017 admitted to evading money-laundering requirements under the Bank Secrecy Act. He is expected to serve his sentence at a detention center near Seattle-Tacoma International Airport.