Binance and Former CEO CZ Hit with Fresh Lawsuit Over Alleged Crypto Laundering

Binance and its former CEO, Changpeng “CZ” Zhao, are facing a new class-action lawsuit alleging their involvement in laundering stolen cryptocurrency. The lawsuit, filed on August 16, 2024, in the United States District Court for the Western District of Washington, claims the defendants facilitated the conversion of stolen digital assets into untraceable funds.

Allegations Against Binance

The plaintiffs—Philip Martin, T.F. (Natalie) Tang, and Yatin Khanna—accuse Binance.com of enabling criminals to obscure stolen assets by converting them into different forms. The complaint alleges that the exchange's operations, under CZ’s leadership, lacked effective anti-money laundering (AML) and know-your-customer (KYC) procedures. This negligence is said to have made Binance a preferred platform for laundering illicit funds, breaching US laws and regulations.

Key allegations include violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), conversion, and aiding and abetting conversion. The plaintiffs argue that Binance’s insufficient compliance controls and deliberate regulatory evasion facilitated extensive criminal exploitation of the platform.

Background of Legal Issues

This lawsuit adds to ongoing legal challenges for Binance and Zhao. In November 2023, Zhao pleaded guilty to US money laundering charges, resigned as CEO, and was fined $4.3 billion. Binance has also faced scrutiny from US regulators, including the SEC and CFTC, for alleged regulatory breaches and misleading practices.

Legal experts suggest that if the class-action suit proceeds to trial, it could test the effectiveness of blockchain analytics and asset recovery mechanisms. The outcome may significantly impact the cryptocurrency industry, influencing how exchanges manage regulatory compliance and fraud prevention.