TLDR:
New class action lawsuit filed against Binance and CZ in US court
Alleges Binance enabled money laundering of stolen crypto
Claims Binance violated RICO Act and financial regulations
Follows $4.3 billion settlement with DOJ in 2023
Puts blockchain analytics and asset recovery methods under scrutiny
Binance, the world’s largest cryptocurrency exchange, and its former CEO Changpeng “CZ” Zhao are facing a new class action lawsuit filed in the United States District Court for the Western District of Washington, Seattle.
The lawsuit, brought by three cryptocurrency investors, alleges that Binance failed to prevent money laundering, allowing thieves to use the platform to launder stolen digital assets.
The plaintiffs claim that their cryptocurrencies were stolen and subsequently deposited on Binance by the thieves to “remove the connection between the ledger and their digital assets,” making the stolen funds untraceable. They argue that Binance’s role in this process violates the Racketeer Influenced and Corrupt Organizations (RICO) Act.
This legal action comes in the wake of Binance’s $4.3 billion settlement with the U.S. Department of Justice in November 2023, where the exchange admitted to violating anti-money laundering laws.
As part of that settlement, CZ stepped down as CEO and pleaded guilty to one count of violating anti-money laundering rules. He was later sentenced to four months in prison.
The new lawsuit alleges that Binance’s rapid rise to becoming the largest crypto exchange was fueled by deliberately evading U.S. regulations, which would have limited its access to the American market. The plaintiffs argue that CZ prioritized profits over legal compliance, creating an environment where U.S. users were encouraged to bypass the platform’s minimal compliance checks.
According to the complaint, Binance’s failure to implement robust Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols turned the exchange into a hub for laundering cryptocurrency, often stolen through hacks and other illicit activities.
The lawsuit claims that without platforms like Binance to launder crypto, it would be easier for authorities to track down bad actors by tracing their steps on the blockchain.
Legal experts have noted that this class action is a predictable follow-up to the government’s earlier enforcement actions. Bill Hughes, Senior Counsel and Director of Global Regulatory Matters at Consensys, pointed out that if the case progresses to trial, it could have significant implications for the entire cryptocurrency industry.
Hughes suggested that the lawsuit puts Binance in a difficult position, as it might need to make arguments about tracing and recovery that could impact the broader industry.
The lawsuit also raises questions about the effectiveness of blockchain analytics and on-chain asset recovery methods. If the case proceeds to the discovery phase or pre-trial motions, these tools and techniques could come under scrutiny.
This legal action is part of a series of challenges facing Binance and CZ. In addition to the Department of Justice settlement, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance in June 2023, accusing the exchange of misleading the SEC about its market surveillance controls and artificially inflating its trading volumes.
The post $4.3 Billion Wasn’t Enough: Binance & CZ Face New Lawsuit Over Alleged Money Laundering appeared first on Blockonomi.
