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Binance and its ex-boss Changpeng "CZ" Zhao are in hot water again—after three crypto investors filed a lawsuit against them, claiming they couldn’t get their stolen assets back because Binance apparently did not play its part in combating the incident.
More: What's Happening Next for CZ and the Crypto?
On August 16, a class-action suit landed in the U.S. District Court for the Western District of Washington, Seattle. The plaintiffs claim their crypto was swiped and sent straight to Binance by the thieves, who apparently thought Binance was the perfect laundromat to “cleanse” the trail.
Their argument is that the whole point of blockchain is its “permanent record” of transactions. Apparently, like writing in ink , you are sure it will never run out,hence leaving every transaction “permanently and accurately traceable.”
They go on to claim that without a convenient service like Binance.com, those pesky bad actors would have actually been caught, as authorities could follow the breadcrumb trail left on the blockchain. The plaintiffs assert that Binance was a key player in the crypto laundering game, which they argue is a clear violation of the Racketeer Influenced and Corrupt Organizations(RICO) Act.
The new lawsuit puts Binance in a tough spot
Bill Hughes, senior counsel and director of global regulatory matters at Consensys, expressed skepticism about the suit's ability to substantiate these allegations.
In an August 20 post on X, Bill Hughes described the new class-action suit as a "natural and predictable follow-on civil action" aimed at leveraging government prosecutions.
👀🚨👀🚨 @binance and @cz_binance were sued last Friday by class plaintiffs in Seattle federal court. An interesting class action brought by top class action lawyers alleging consumer harm as a result of Binance's money laundering. And the natural, predictable follow-on civil… pic.twitter.com/vMlFuUnzEr
— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) August 20, 2024
However, Hughes noted that the lawsuit places Binance in a "tough position" and could have significant implications for the crypto industry if it were to proceed to trial.
He suggested that if the case advances to discovery or pre-trial motions, it could put the effectiveness of blockchain analytics and on-chain asset recovery under scrutiny. He also remarked that Binance could find itself in a difficult position, especially if it values the broader industry's future.
Binance vs U.S Authorities and the SEC
In November 2023, CZ admitted to breaking U.S. money laundering laws and resigned as Binance CEO as part of the settlement with authorities. Binance also agreed to pay $4.3 billion in fines to settle regulatory issues.
In April, a federal judge handed CZ a four-month prison sentence, significantly less than the three years prosecutors were pushing for. He began serving his time in June and is expected to be out by September.
Related: Jail Time Won't Dampen Binance and C.Z.'s Fortunes
In June 2023, the U.S. Securities and Exchange Commission (SEC) also took legal action against Binance, accusing the exchange and CZ of deceiving the SEC about its market surveillance practices and inflating trading volumes. On June 28, a court allowed most of the case to move forward.
Kataryna Habeliia
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