Binance and its former CEO, Changpeng “CZ” Zhao, are facing a new class-action lawsuit from three cryptocurrency investors. The investors allege that Binance failed to prevent money laundering, which they claim has made it impossible for them to recover their stolen assets.
The lawsuit was filed in the United States District Court for the Western District of Washington, Seattle, and alleges that thieves used Binance to launder stolen crypto, making the assets untraceable.
The plaintiffs argue that one of blockchain technology’s key features is its ability to permanently and traceably record transactions. They claim that without platforms like Binance enabling money laundering, authorities could potentially recover stolen crypto by tracking the blockchain trail.
The lawsuit alleges that Binance’s role in laundering these assets violates the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Bill Hughes, senior counsel at Consensys, doubts the plaintiffs’ ability to prove their case but acknowledged that the lawsuit puts Binance in a tough spot. He pointed out that if the case advances to discovery or trial, it could have severe implications for the crypto industry, particularly regarding the effectiveness of blockchain analytics and the potential for recovering assets on-chain.
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India’s Financial Intelligence Unit (FIU) has already imposed a fine of 188.2 million rupees ($2.25 million) on Binance for operating in violation of local anti-money laundering (AML) regulations.
Binance has also faced regulatory actions in other jurisdictions; in May, Canada’s anti-money laundering agency fined the exchange $4.38 million for AML rule violations.
CZ, who pleaded guilty in November 2023 to violating U.S. money laundering laws and resigned as Binance CEO as part of a settlement, is currently serving a four-month prison sentence. Additionally, Binance is facing other legal challenges, including a lawsuit from the U.S. Securities and Exchange Commission (SEC) alleging misleading practices and inflated trading volumes.
