Binance and its former CEO, Changpeng Zhao, are facing a new class action lawsuit as highlighted by Bill Hughes, lawyer at Consensys. Filed last Friday in a federal court in Seattle, the lawsuit accused Binance of being a key player in an alleged money laundering scheme that caused significant financial harm to U.S. consumers.
The plaintiffs claim that their cryptocurrencies were stolen in various hacks and thefts and later laundered through Binance, with the exchange’s full knowledge and involvement. This lawsuit follows earlier government prosecutions and enforcement actions against Binance, making it a natural progression in the legal battles surrounding the exchange.
The lawsuit, led by a team of highly experienced class action attorneys, alleged that Binance’s business model was not only aware of but actively encouraged illegal activities, including money laundering.
The plaintiffs argue that Binance’s role in facilitating these transactions constitutes illegal racketeering under the RICO statute, which could lead to triple damages if proven. This is a serious allegation, as the RICO statute is typically used to combat organized crime, and its application in a cryptocurrency context could set a significant legal precedent.
The lawsuit highlights that Binance’s actions directly blocked the recovery of stolen funds. The plaintiffs argue that the transparent nature of blockchain transactions should have allowed victims to trace and reclaim their stolen assets, but Binance’s involvement in laundering these funds prevented this from happening.
However, Binance’s involvement in laundering these funds made it impossible for them to do so. This claim will likely be a central point of contention in the case, as it challenges the effectiveness of blockchain analytics and on-chain asset recovery.
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The lawsuit’s outcome could have far-reaching implications for the cryptocurrency industry, particularly regarding the responsibilities of exchanges in preventing money laundering and facilitating asset recovery.
If the case progresses to discovery or pre-trial motions, it could put Binance in a difficult position, forcing the exchange to reveal its internal practices and policies related to transaction tracing and anti-money laundering measures.
Earlier this year, Changpeng Zhao faced significant legal challenges, including a multi-year investigation into Binance’s operations. As a result of this investigation, Zhao admitted to inadequate enforcement of anti-money laundering measures, agreed to step down as CEO, and faced a four-month imprisonment. Additionally, Zhao personally paid a $50 million fine, while Binance was fined $4.3 billion.
