Binance Hit with New Class-Action Lawsuit Over Money Laundering Failures

August 21, 2024

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Crypto exchange Binance and its former CEO, Changpeng “CZ” Zhao, are facing fresh legal troubles as three crypto investors file a class-action lawsuit against the company.

The lawsuit, submitted in the United States District Court for the Western District of Washington, Seattle, accuses Binance of failing to prevent money laundering, which allegedly resulted in the plaintiffs losing their digital assets.

Binance Use to Launder Stolen Funds

The plaintiffs in the case claim that their crypto was stolen by bad actors who subsequently used Binance to launder the funds, making them nearly impossible to trace. According to the lawsuit, the thieves exploited Binance’s platform to obscure the connection between the stolen assets and their original owners.

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The suit highlights that the transparency of blockchain should allow authorities to track down stolen assets by retracing the transactions on the ledger. However, the plaintiffs allege that Binance’s services were instrumental in facilitating the laundering process, which they argue is a violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act.

What Do the Experts Think?

While the allegations are severe, some legal experts are skeptical about the lawsuit’s chances of success. Bill Hughes, senior counsel and director of global regulatory matters at Ethereum development firm Consensys, expressed doubts about the plaintiffs’ ability to substantiate their claims.

In an X post, Hughes described the lawsuit as a “natural, predictable follow-on civil action” seeking to capitalize on existing government prosecutions against Binance.

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Binance’s Legal Challenges

This new class-action lawsuit adds to Binance’s mounting legal challenges. Earlier this year, the U.S. Securities and Exchange Commission (SEC) filed a suit against Binance and CZ, accusing them of misleading regulators about the exchange’s market surveillance controls and artificially inflating trading volumes. That case is currently proceeding after a court approved most of the SEC’s claims.

Additionally, in March, the 2nd U.S. Circuit Court of Appeals in Manhattan revived a separate lawsuit against Binance, in which investors accused the exchange of selling unregistered tokens that later incurred significant losses.

Notably, CZ resigned as Binance CEO in November 2023 after pleading guilty to violating U.S. money laundering laws.