- Binance and CZ are sued for allegedly laundering stolen cryptocurrency assets.
- Plaintiffs claim Binance’s lack of AML and KYC controls facilitated the laundering.
- The case could impact blockchain analytics and crypto exchange compliance standards.
Binance and its former CEO, Changpeng “CZ” Zhao, are now confronted with a new class-action lawsuit alleging their involvement in laundering stolen cryptocurrency.
The complaint, filed on August 16, 2024, in the United States District Court for the Western District of Washington, accuses the defendants of facilitating the conversion of stolen digital assets into untraceable funds.
Binance accused of helping criminals to obscure stolen assets
The lawsuit, brought by plaintiffs Philip Martin, T.F. (Natalie) Tang, and Yatin Khanna, asserts that Binance’s crypto exchange, Binance.com, was central to a scheme enabling criminals to obscure stolen assets.
According to the plaintiffs, the exchange’s operations allowed bad actors to use the platform to convert stolen cryptocurrency into different assets, effectively erasing the connection between the original stolen funds and their new form.
The complaint highlights that Binance, under CZ’s leadership, failed to implement effective anti-money laundering (AML) and know-your-customer (KYC) procedures. This failure, the lawsuit argues, made Binance a preferred choice for laundering illicit funds, directly violating US laws and regulations designed to protect consumers and national security.
Key points of the lawsuit include allegations of violating the Racketeer Influenced and Corrupt Organizations Act (RICO), conversion, and aiding and abetting conversion. The plaintiffs claim that Binance’s lack of compliance controls and deliberate evasion of regulatory measures enabled criminals to exploit the platform extensively.
Binance and Changpeng “CZ” Zhao’s legal woes
This lawsuit follows a series of legal troubles for Binance and Zhao. In November 2023, CZ pleaded guilty to US money laundering charges and resigned as CEO as part of a settlement that included a $4.3 billion fine.
Binance has also faced scrutiny from various US regulators, including the SEC and CFTC, for alleged regulatory violations and misleading practices.
Legal experts suggest that if the class-action suit proceeds to trial, it could put the efficacy of blockchain analytics and on-chain asset recovery to the test.
The outcome could have profound implications for the cryptocurrency industry, potentially reshaping how exchanges handle regulatory compliance and fraud prevention.