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LUCKNOW (CoinChapter.com) – Binance, the crypto exchanges, and its former CEO Changpeng Zhao (CZ) are facing a fresh class action lawsuit. Three crypto investors have filed the suit, alleging that the exchange to prevent money laundering. This left them unable to recover their stolen digital assets.
Three plaintiffs have filed a lawsuit against Binance and former CEO CZ. Source: PacerMonitor
The lawsuit, filed on August 16 in the U.S. District Court for the Western District of Washington, Seattle, brings serious accusations against the crypto giant. The plaintiffs claim that after their cryptocurrencies were stolen, the thieves used Binance to launder the funds. This made those funds untraceable.
Allegations of RICO Act Violation
At the core of this lawsuit is the blockchain technology underlying cryptocurrencies. The plaintiffs argue that a key attribute of crypto transactions is “a permanent record of those transactions” on the blockchain, making them “permanently and accurately traceable.” However, they claim Binance provided a platform for thieves to break this chain of traceability.
The lawsuit states:
Therefore, without a place to launder crypto, such as Binance.com, if a bad actor steals someone else’s crypto, there is a risk the authorities would eventually track them down by retracing their steps on the blockchain.
By allegedly facilitating this process, the plaintiffs claim that Binance violated the Racketeer Influenced and Corrupt Organizations (RICO) Act. RICO is a federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization.
The Lawsuit Puts Binance In a “Tough Position”
Bill Hughes, senior counsel and director of global regulatory matters at Ethereum development firm Consensys, offered insights into the case. Hughes said he’s “dubious” about whether the suit will be able to prove these allegations. He described it as a “natural, predictable follow-on civil action” seeking to capitalize on government prosecutions.
Source: Bill Hughes on X
However, Hughes also noted that the lawsuit puts Binance in a “tough position” and could have significant ramifications for the crypto industry if it goes to trial. He stated:
If this case goes far into discovery and even to dispositive pre-trial motions, then the efficacy of blockchain analytics itself and on-chain asset recovery will be on trial.”
This class action is the latest in a series of legal challenges for Binance and CZ. 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 $4.3 billion in fines for “civil regulatory enforcement actions.”
In April 2024, a federal judge sentenced CZ to four months in prison, shorter than the three years federal prosecutors requested. He started serving his sentence in June and is set to be released in September.
The Securities and Exchange Commission (SEC) also filed a suit against Binance in June 2023, accusing the exchange and CZ of misleading about its market surveillance controls and artificially inflating its trading volumes. On June 28, 2024, the court gave the green light for most of the case to proceed.
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