Binance And Former CEO CZ Slapped With New Lawsuit For Allegedly Enabling Widespread Money Laundering

A fresh class action suit has been lodged against Binance, accusing the company and its founder, Changpeng Zhao, of failing to prevent money laundering on the platform. The plaintiff alleges that Binance and CZ’s sloppy compliance practices allowed nefarious actors to use the exchange to launder stolen crypto, causing massive financial losses to U.S. customers.

New Lawsuit Calls Binance A Crypto Wash Empire

In the August 16 class-action lawsuit filed in the U.S. Western District Court of Washington, former exchange users Philip Martin, Natalie Tang, and Yatin Khanna allege their crypto assets were stolen, and the bad actors moved those funds to Binance to “remove the connection between the ledger and their digital assets,” essentially making them difficult to trace.  

The plaintiffs explained how Binance, under Zhao’s leadership, allegedly operated as an unlicensed money-transmitting business, deliberately flouting anti-money laundering rules and enabling transactions that helped thieves conceal the origins of ill-gotten assets. 

According to the complaint, Binance’s rapid climb to becoming the world’s biggest crypto exchange by trading volume was spurred by its willful circumvention of U.S. laws, which would have otherwise restricted its access to the profitable U.S. crypto market.

The class action suit further alleges that former Binance CEO Zhao prioritized profits over regulatory adherence, creating a platform that allowed American customers to sidestep the exchange’s minimal compliance requirements.

According to the plaintiffs, Binance’s failure to enact rigorous anti-money laundering and know-your-customer (KYC) practices turned the exchange into a “Crypto-Wash Empire”.

The new class action follows a slew of regulatory actions against Zhao and Binance. In November 2023, Zhao and Binance reached a plea agreement with the U.S. Department of Justice for violating US money laundering laws, where they agreed to pay a $4.3 billion fine, and CZ resigned as CEO.

Implications For The Crypto Industry

Bill Hughes, a lawyer at Ethereum development company Consensys, suggested in a Tuesday X post that the fresh lawsuit against Binance and CZ was a “natural, predictable follow-on civil action” that aims to capitalize on the previous government prosecutions.

Nonetheless, Hughes believes the suit puts Binance in a “tough position”, adding that it could have serious implications for the crypto industry if it makes it to trial.

“If this case goes far into discovery and even to dispositive pre-trial motions, then the efficacy of blockchain analytics itself and on-chain asset recovery will be on trial,” the legal expert postulated.