Author: Stephen Katte, CoinTelegraph; Translated by: Wuzhu, Golden Finance
Binance and its former CEO Changpeng Zhao (CZ) are facing a new class-action lawsuit from three cryptocurrency investors who claim they are unable to recover stolen assets because the exchange failed to prevent money laundering.
In a class-action lawsuit filed on August 16 in the U.S. District Court for the Western District of Washington, plaintiffs claim that their cryptocurrencies were stolen and that the thieves sent those funds to Binance in order to “sever the connection between the ledger and their digital assets,” making them untraceable.
Three plaintiffs have filed a civil lawsuit against Binance and former CEO CZ. Source: PacerMoniter
The plaintiffs argue that a key attribute of cryptocurrency transactions is the “permanent record of those transactions” on the blockchain, which makes them “permanent and accurately traceable.”
“Thus, without a place like Binance.com to launder money, if bad actors stole someone else’s cryptocurrency, authorities could eventually track them down by retracing their steps on the blockchain,” the class action lawsuit states.
The plaintiffs allege that Binance was an integral part of the money laundering process in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
Binance in Trouble Due to Class Action Lawsuit
Bill Hughes, senior counsel and director of global regulatory affairs at ethereum development firm Consensys, said he was “skeptical” that the lawsuit would prove the allegations.
In an Aug. 20 post to X, Hughes said the new class action lawsuit is a “natural, foreseeable follow-on civil action” designed to capitalize on the government’s prosecution.
However, Hughes also said that the lawsuit puts Binance in a “difficult situation” and said that if the lawsuit goes to trial, it could have a significant impact on the cryptocurrency industry.
Source: Bill Hughes
“If this case proceeds to a decisive pretrial motions stage, the validity of the blockchain analysis itself and the recovery of on-chain assets will be put to trial,” he said.
“Binance is incentivized to talk about trace and recovery things — which, to be honest, is a tough position to be in if you care about this industry,” Hughes added.
“The effectiveness of blockchain analysis itself and on-chain asset recovery will be judged.”
In November 2023, CZ pleaded guilty to violating U.S. money laundering laws and resigned as Binance CEO as part of a settlement with authorities. Binance agreed to pay a $4.3 billion fine for a “civil regulatory enforcement action.”
In April, a federal judge sentenced CZ to four months in prison, less than the three years federal prosecutors had sought. He began serving his sentence in June and is due to be released in September.
The U.S. Securities and Exchange Commission (SEC) also filed a lawsuit against Binance in June 2023, accusing the exchange and CZ of misleading market surveillance controls and artificially inflating its trading volume. On June 28, the court approved most of the case.