Binance accused of acting as a “getaway driver” in new crypto laundering lawsuit

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

The lawsuit, filed on August 16 in the U.S. District Court for the Western District of Washington, accuses Binance of facilitating money laundering activities by using cryptocurrencies as a delivery system.

“Binance.com became the preferred choice as an ‘escape route’ for a large number of fraudsters,” the lawsuit states.

The plaintiffs – Philip Martin, Natalie Tang and Yatin Khanna – claim that Binance’s lax compliance measures allowed criminals to launder stolen cryptocurrencies and hide the origin of the illicit funds.

Details of the lawsuit

The lawsuit claims that all crypto transactions should be permanently recorded on the public blockchain so that they can be traced. In this case, Binance allegedly allowed malicious actors to disconnect digital assets from the ledger, making them impossible to track.

Under Zhao’s leadership, the lawsuit also accuses Binance to operate as an unlicensed money transfer company in the United States, deliberately circumventing anti-money laundering regulations in order to fuel its growth in America.

According to the lawsuit, stolen cryptocurrencies were 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 organization.

Bill Hughes, an attorney at Consensys, told X that the plaintiffs were represented by “deep-pocketed” former attorneys who had strong credentials and had represented groups in a number of high-profile cases in the past.

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

Binance’s fair share of legal problems

The lawsuit follows a settlement between Binance and the U.S. Department of Justice in which the company admitted to violating anti-money laundering regulations and agreed to pay a $4.3 billion fine.

In June, Zhao began a four-month prison sentence in a low-security federal prison in California after pleading guilty to violating U.S. anti-money laundering laws.

The outcome of this litigation could have far-reaching implications for Binance and the cryptocurrency industry in general. If the case proceeds, it could test the effectiveness of blockchain analysis and the challenges of recovering stolen digital assets, and potentially set new precedents in the regulation of crypto exchanges.