Binance and Changpeng Zhao Face New Lawsuit Over Alleged Money Laundering

Jimmy Aki
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Binance, a major cryptocurrency exchange, and its former CEO, Changpeng Zhao (CZ), are facing a new class-action lawsuit. Three investors filed the lawsuit on August 16, 2024, in the U.S. District Court for the Western District of Washington in Seattle, accusing the exchange of failing to prevent the laundering of stolen crypto on the platform.

Ongoing Legal Conflict Between SEC and Binance

The lawsuit claims that the stolen crypto became difficult to trace because Binance enabled money laundering.

The allegations are that Binance allowed criminals to launder stolen crypto funds and harmed American users due to its lax anti-money laundering policies. However, the official assets laundered were not disclosed.

The plaintiffs are also accusing Binance of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act. This is a U.S. federal law that targets organized criminal activities and racketeering.

The lawsuit states,

“Therefore, without a place to launder crypto, such as Binance.com, if a bad actor steals someone else’s crypto, there is a risk the authorities would eventually track them down by retracing their steps on the blockchain,”

Legal expert Bill Hughes from ConsenSys shared his thoughts on the case on social media platform X. He stated that while the lawsuit follows a trend of civil actions after government prosecutions, it could have big effects on the crypto industry.

Hughes also said the lawsuit puts Binance in a “tough position,” claiming that it would have a major impact on the crypto industry if it ever went to trial.

Notably, this lawsuit is coming at a time when Binance is re-entering the Indian market months after India’s Financial Intelligence Unit (FIU) issued show-cause notices to several offshore crypto exchanges, including Binance, for allegedly operating illegally in the country.

Binance Has Other Pending Legal Issues

This is not the first time Binance will be facing lawsuits in recent years. In June 2023, the U.S. Securities and Exchange Commission (SEC) sued Binance and Changpeng Zhao (CZ).

The SEC claims that Binance misled it about its market surveillance controls and inflated its trading volumes. CZ pleaded guilty to violating U.S. money laundering law and resigned as the CEO of Binance while he and the exchange agreed to pay $4.3 billion in fines.

CZ was sentenced to four months in prison, which is shorter than the three years prosecutors had asked for. He began serving his sentence in June 2024 and is expected to be released in September 2024.

In addition, the Nigerian government has accused Binance of helping with money laundering and tax evasion. In February, two Binance executives were arrested in Nigeria for these allegations.

They have been charged, and one is still in custody. The Nigerian government then declared Binance’s operations illegal in the country.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.