Binance, one of the world’s largest cryptocurrency exchanges, and its former CEO, Changpeng “CZ” Zhao, are embroiled in a fresh legal battle. A class-action lawsuit filed on August 16 in the United States District Court for the Western District of Washington accuses Binance of facilitating the laundering of stolen crypto assets, leaving the victims unable to recover their funds.
The plaintiffs allege that their stolen cryptocurrencies were transferred to Binance by the thieves, who used the exchange to sever the connection between the assets and the blockchain ledger, rendering them untraceable. This process, they argue, contradicts the inherent transparency of blockchain technology, which is supposed to provide a permanent and traceable record of transactions.
The lawsuit claims that Binance’s involvement was crucial in the money laundering scheme, potentially violating the Racketeer Influenced and Corrupt Organizations (RICO) Act. This legal action places Binance in a precarious situation, with significant implications for the broader crypto industry if the case proceeds to trial.
Bill Hughes, senior counsel at Consensys, expressed skepticism about the plaintiffs’ ability to prove their case but acknowledged that the lawsuit could force Binance into a difficult position. He noted that if the case advances, it could put blockchain analytics and on-chain asset recovery under intense scrutiny.
This lawsuit follows a series of legal challenges for Binance and CZ. In November 2023, CZ pleaded guilty to violating U.S. money laundering laws, resulting in his resignation and a $4.3 billion fine for Binance. He was sentenced to four months in prison, which he began serving in June.
The U.S. Securities and Exchange Commission (SEC) also sued Binance and CZ in June 2023, accusing them of misleading regulators and manipulating trading volumes. The court has allowed most of the SEC’s case to proceed, adding to Binance’s mounting legal troubles.