Binance accused of acting as ‘get-away driver’ in new crypto laundering lawsuit

Binance and its founder, Changpeng Zhao, are facing a class-action lawsuit in the United States and are accused of facilitating money laundering through cryptocurrencies.

The lawsuit, filed in the U.S. District Court for the Western District of Washington on Aug. 16, alleges that Binance facilitated money laundering activities by using the cryptocurrency as a distribution system.

“Binance.com has become a preferred option as an ‘escape route’ for many malicious individuals,” the lawsuit states.

Plaintiffs Philip Martin, Natalie Tang, and Yatin Khanna allege that Binance’s lax compliance measures enabled criminals to launder stolen cryptocurrencies and conceal the sources of illicit funds.

Case details

The lawsuit claims that all crypto transactions should be permanently recorded on the public blockchain, making them traceable. The lawsuit claims that Binance allowed malicious actors to separate digital assets from the ledger, making them impossible to track.

The lawsuit, led by Zhao, also alleges that Binance operated as an unlicensed money transmitter in the U.S. and deliberately evaded anti-money laundering requirements to fuel its growth in the U.S.

According to the lawsuit, the stolen crypto was routed through Binance, making it difficult to track due to the platform’s inadequate Know Your Customer protocols. The plaintiffs argue that this violates the Racketeer Influenced and Corrupt Organizations Act, which targets illegal activity as part of an ongoing criminal enterprise.

Bill Hughes, an attorney at Consensys, told X that the plaintiffs are represented by veteran attorneys with “deep pockets,” good credentials and a track record of representing classes in a variety of high-profile cases.

These cases include lawsuits against Facebook for violating consumer privacy, against opioid manufacturers over opioids, and against Wells Fargo over fake accounts.

Binance has its fair share of legal issues

The legal action comes after Binance recently reached a settlement with the U.S. Department of Justice, in which the company admitted to violating anti-money laundering (AML) regulations and agreed to pay a fine of $4.3 billion.

Zhao was sentenced to four months in a low-security federal facility in California after pleading guilty in June to violating U.S. anti-money laundering laws.

The outcome of this case could have far-reaching implications for Binance and the broader crypto industry. If the case goes ahead, it could test the effectiveness of blockchain analytics and the difficulty of recovering stolen digital assets, potentially setting new legal precedents for regulating crypto exchanges.