Three cryptocurrency investors have filed a class-action lawsuit against Binance, alleging the exchange facilitated money laundering and hindered their efforts to recover stolen assets. This lawsuit adds another layer of legal pressure to the embattled exchange, which recently saw its former CEO, Changpeng Zhao (CZ), serve prison time for similar offenses.
The lawsuit, filed on August 16th in the Western District Court of Washington, alleges that the plaintiffs’ cryptocurrency was stolen and then transferred to Binance by the perpetrators. The plaintiffs argue that crypto transactions are typically traceable due to the permanent record kept on the blockchain ledger. However, they claim Binance facilitated the laundering of their stolen assets by allowing the thieves to “remove the connection between the ledger and their digital assets,” effectively making them untraceable.
The lawsuit centers around the Racketeer Influenced and Corrupt Organizations Act (RICO), a legal statute that targets criminal organizations and their activities. By alleging that Binance played a crucial role in laundering stolen cryptocurrency, the plaintiffs are essentially accusing the exchange of aiding and abetting a criminal operation.
While the future of the lawsuit is uncertain, legal experts like Bill Hughes, Senior Counsel at Consensys, acknowledge the potential impact it could have on the crypto industry. Hughes, in an August 20th X post, expressed skepticism about the lawsuit’s ability to definitively prove its claims. However, he acknowledges that it could force a deeper examination of the effectiveness of blockchain analytics and on-chain asset recovery methods.
CZ’s Past Legal Troubles
It’s important to note that CZ recently faced legal consequences for similar accusations. In November 2023, he pleaded guilty to violating US money laundering laws and stepped down as Binance CEO as part of a settlement with authorities. Binance also agreed to pay a hefty $4.3 billion fine for failing to comply with regulatory requirements. Additionally, in April 2024, CZ served a four-month prison sentence for his involvement in these activities.
Binance Faces Ongoing Legal Scrutiny
The recent class-action lawsuit adds to Binance’s existing legal challenges. In June 2023, the US Securities and Exchange Commission (SEC) filed a separate lawsuit against the exchange, accusing it of misleading the SEC about its market surveillance practices and artificially inflating trading volumes. A significant portion of this lawsuit was allowed to proceed by the courts in June 2024.
As the cryptocurrency industry continues to mature, regulatory scrutiny and legal actions like this class-action lawsuit highlight the importance of transparency and compliance for exchanges like Binance. The outcome of this lawsuit will be closely watched by investors and industry participants alike.
