Changpeng “CZ” Zhao was sentenced by a Seattle court on Tuesday after pleading guilty to violations of US anti-money laundering and sanctions laws last year.
A US judge handed down the four-month sentence despite prosecutors pushing for a three-year term, as the court took into account the “positive nature” of Mr Zhao’s past behaviour.
His prison sentence will make him one of the wealthiest inmates ever, boasting a net worth of around $33bn through his ownership of Binance. He stepped down as chief executive last year.
In US legal filings, government lawyers said Mr Zhao had “bragged” about breaking the law during his time at Binance, as he allowed criminals to launder money on the platform.
The Treasury Department previously alleged Binance had failed to stop terror groups, including Hamas, ISIS, al-Qaeda and other criminals, from conducting cryptocurrency transactions on its exchange, turning a “blind eye” to its legal duties.
Prosecutors said Mr Zhao allowed it to happen because it was the “best way to attract users, build his company, and line his pockets”.
The US Government added: “Zhao bet that he would not get caught and that if he did, the consequences would not be as serious as the crime.”
In response, Mr Zhao’s lawyers argued he should not be sent to prison and stressed he was sorry for the harm caused by Binance.
The company was earlier this year ordered to pay $4.3bn after an investigation found it had helped users bypass sanctions.
During his defence, Mr Zhao apologised for his “mistakes” and said the company had been cooperating with the government’s investigations.
He said that once freed he planned to develop education technology for underprivileged children.
The ruling comes weeks after Sam Bankman-Fried, Mr Zhao’s rival and former chief executive of collapsed cryptocurrency exchange FTX, was sentenced to 25 years for a multibillion-dollar fraud.
The sentences mean the two men who once vied for dominance over the trillion-dollar cryptocurrency industry will now both spend time behind bars.
FTX was at one stage the world’s second-biggest cryptocurrency exchange by trading volume behind Binance, with its leaders regularly trading barbs on social media in a bitter rivalry.
Mr Zhao came close to bailing out FTX in 2022 before ultimately pulling out of the deal.
This led to FTX filing for bankruptcy in November of that year after a multibillion-dollar black hole was uncovered in its accounts.
Mr Bankman-Fried was subsequently found guilty of fraud after he was found to have siphoned off billions of dollars in customer funds for high-risk investments.
He is appealing the conviction.
Binance, which is based offshore, has since retained its place as the world’s most popular cryptocurrency exchange.
