Changpeng Zhao, former CEO of Binance, is facing a class action lawsuit related to money laundering. Three crypto investors have claimed to have lost their digital assets due to the exchange’s failure to prevent money laundering.
In a complaint filed on August 16, 2024, before the District Court for the Western District of Washington, Seattle, three investors have lodged allegations against Changpeng Zhao and Binance.
Allegedly, the assets were stolen and transferred to Binance. They have further alleged that the thieves did this to break the chain of events that links the ledger to their digital assets, rendering them untraceable.
The plaintiffs assert that other characteristic feature of crypto transactions is that all transactions are recorded and are permanently and accurately identifiable from the blockchain.
Thus, if there is no place to ‘wash’ crypto like Binance, and a threat actor steals someone else’s crypto, there is a risk that the authorities would one day find them by following the trail on audited blockchains, as the class action lawsuit claims.
According to the complainants, Binance was allegedly an active participant in the process of money laundering, and thus it violates the provisions of the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Binance, Changpeng Zhao Money Laundering Lawsuit
Bill Hughes, a senior counsel and director of global regulatory matters at Ethereum development firm Consensys, said he has his doubts whether the company will be able to provide the proof for such allegations.
On August 20, Hughes posted on X that the new class action suit is the typical and inevitable second civil action aiming at capitalizing the government prosecutions.
But Hughes also stated that the case is now putting Binance on the defensive, and he noted that if this case ever went to trial, it could very dramatically negatively impact the future of crypto finance across the world.
He said that if this case proceeds to the discovery stage and potentially to dispositive pretrial motions, the effectiveness of blockchain analytics and on-chain asset recovery will be in dispute.
The things that Binance would be incentivized to say about tracing and recovery –kind of a challenging position to be in, honestly, if you care anything about the industry, Hughes added.
Money Laundering Conspiracy
CZ was charged in November 2023 with conspiracy to launder money in contravention of the laws of the US, and as part of the settlement, he stepped down from his post at Binance. Binance had promised to pay $4.3 billion as a fine for “civil regulatory enforcement actions.”
In April, a federal judge gave CZ a four-month prison term despite federal prosecutors’ demands for a three-year term. The defense said he has been serving his sentence since June and will be released in September.
The Securities and Exchange Commission acted against Binance in June 2023 following the arrest of its CEO over the charges of manipulating the market. Most of it was cleared by a court on June 28 to proceed to trial.
