CZ And Binance Facing Yet Another Lawsuit, This Time For Being (Allegedly) Complicit In Money Laundering

Many industry professionals believe this latest lawsuit against CZ and Binance is opportunistic following their recent legal troubles.

Binance and its former CEO Changpeng “CZ” Zhao face yet another class-action lawsuit. This latest case comes from three crypto investors who say they could not recover their stolen assets as the exchange failed to prevent money laundering.

CZ Continues To Rack Up The Lawsuits

BINANCE AND CZ HIT WITH LAWSUIT OVER ALLEGED CRYPTO LAUNDERING

Binance – $BNB and former CEO Changpeng Zhao (CZ) are facing a new lawsuit from three investors. pic.twitter.com/tbc6Uv8onr

— Creative Investor (@MarkCutts13) August 21, 2024

A class-action suit dated August 16, 2024, was filed in the United States District Court for the Western District of Washington, Seattle.

The plaintiffs claim their digital assets were stolen before the funds were sent to Binance by the robbers to “remove the connection between the ledger and their digital assets,” making them untraceable.

The plaintiffs argued that a key feature of the blockchain is that it offers “a permanent record of transactions,” making them “permanently and accurately traceable.”

The suit says, “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”.

They allege that Binance was an essential part of the money laundering process, which violates the Racketeer Influenced and Corrupt Organizations (RICO) Act.

Industry Professionals Believe This Latest Case Is An Attempt To Piggyback Off Of Ongoing Regulatory Crackdown

👀🚨👀🚨 @binance and @cz_binance were sued last Friday by class plaintiffs in Seattle federal court. An interesting class action brought by top class action lawyers alleging consumer harm as a result of Binance's money laundering. And the natural, predictable follow-on civil… pic.twitter.com/vMlFuUnzEr

— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) August 20, 2024

Many are skeptical that this lawsuit will succeed. Bill Hughes, Director of Global Regulatory Matters at Web3 firm Consensys, said he’s “dubious” about whether the suit will be able to prove these allegations.

He posted to his X account on August 20. Hughes said the new class-action suit was a “natural, predictable follow-on civil action” that seeks to capitalize on government prosecutions.

However, Hughes also said the lawsuit puts Binance in a “tough position” and that if it goes to trial, it could have significant ramifications for the crypto industry.

“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,” he said.

“The things that Binance would be incentivized to say about tracing and recovery – kinda a tough position to be in, honestly, if you care anything about the industry,” Hughes added.

With that said Hughes believes ultimately that CZ pays to make the issue go away, saying, “If this case goes far into discovery and even to dispositive pre-trial motions (it probably won’t – CZ gonna open up that wallet and make it go away at some point), then the efficacy of blockchain analytics itself and on-chain asset recovery will be on trial! (cc: FBI, HSI, IRS-CI, Chainalysis, TRM, Merkle, Elliptic, et al.)”.

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Binance And CZ’s Recent Troubles

In November 2023, CZ pleaded guilty to violating U.S. money laundering laws. As a result, he resigned as Binance CEO as part of a settlement with authorities. Binance agreed to pay $4.3 billion in fines for “civil regulatory enforcement actions.”

In April 2024, a federal judge sentenced CZ to four months in prison, shorter than the three years federal prosecutors requested. He began serving his sentence in June and is expected to be released in September.

Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.