Binance and its founder, Changpeng Zhao, face a class-action lawsuit in the United States and are accused of enabling money laundering activities via crypto.
The lawsuit, filed on Aug. 16 in the U.S. District Court for the Western District of Washington, accuses Binance of enabling money laundering activities using cryptocurrency as a delivery system.
“Binance.com became a preferred-choice as the “get-away driver” for a large number of bad actors,” the lawsuit read.
The plaintiffs — Philip Martin, Natalie Tang, and Yatin Khanna — claim that Binance’s lax compliance measures allowed criminals to launder stolen crypto and hide the origins of the illicit funds.
Lawsuit details
The lawsuit alleges that all crypto transactions should be permanently recorded on the public blockchain, making them traceable. In this case, Binance allegedly allowed bad actors to disconnect digital assets from the ledger, making tracking impossible.
Under Zhao’s leadership, the lawsuit also accuses Binance of operating as an unlicensed money-transmitting business in the U.S., deliberately bypassing anti-money laundering requirements to boost its growth in America.
According to the lawsuit, stolen crypto was funneled through Binance, making them difficult to trace due to the platform’s inadequate Know Your Customer protocols. The plaintiffs argue that this violated the Racketeer Influenced and Corrupt Organizations Act, which targets illegal activities as part of an ongoing criminal enterprise.
Bill Hughes, a lawyer at Consensys, posted to X that the plaintiffs are represented by former lawyers with “deep pockets” who are well credentialed and have a history of representing classes in various high-profile cases.
These cases include suing Facebook over consumer privacy violations, opioid manufacturers over opioids, and Wells Fargo over fraudulent accounts.
Binance’s fair share of legal issues
The legal action follows Binance’s recent settlement with the U.S. Department of Justice, in which the company admitted to violating AML regulations and agreed to pay $4.3 billion in fines.
In June, Zhao began a four-month prison sentence in a low-security federal facility in California after pleading guilty to violating U.S. anti-money laundering laws.
The outcome of this lawsuit could have far-reaching implications for Binance and the broader cryptocurrency industry. If the case proceeds, it may test the efficacy of blockchain analytics and the challenges of recovering stolen digital assets, potentially setting new legal precedents in regulating crypto exchanges.