Binance and its former CEO, Changpeng Zhao (CZ), are back in the hot seat, facing yet another class-action lawsuit. Filed on August 16 in the U.S. District Court for the Western District of Washington, this latest legal battle could put the entire crypto industry under the microscope. The lawsuit, spearheaded by three crypto investors, accuses Binance of facilitating the laundering of stolen cryptocurrency, making it impossible for the rightful owners to recover their assets.
Binance Accused of Erasing Stolen Crypto Trails
The crux of the lawsuit is simple but alarming. The plaintiffs claim their crypto assets were stolen and then funneled through Binance, where the digital trail was erased, making recovery impossible. According to the lawsuit, “a permanent record of those transactions” on the blockchain should have made the stolen crypto “permanently and accurately traceable.” Yet, the plaintiffs argue, Binance acted as a laundromat, scrubbing the transactions clean and rendering the assets untraceable.
“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,” the suit contends. This accusation hits hard at Binance, alleging that the exchange was a crucial cog in the money laundering machine, a violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Blockchain Faces Industry-Shaking Trial
The implications of this lawsuit could ripple far beyond Binance. Bill Hughes, senior counsel and director of global regulatory matters at Consensys, pointed out on X that the case could put “the efficacy of blockchain analytics itself and on-chain asset recovery” on trial.
If the case advances, it could force the industry to confront whether blockchain technology, touted for its transparency, is truly as foolproof as advertised. Hughes noted that the case is a “natural, predictable follow-on civil action” in the wake of previous government prosecutions. However, he also expressed skepticism about the lawsuit’s chances of success, describing Binance’s position as “tough.”
CZ’s Legal Woes Continue
CZ’s legal troubles have been piling up. After pleading guilty in November 2023 to violating U.S. money laundering laws, CZ stepped down as Binance’s CEO and agreed to a whopping $4.3 billion settlement with authorities. His plea deal also included a four-month prison sentence, which he began serving in June 2024.
As if that weren’t enough, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance in June 2023, accusing the exchange of misleading the SEC and inflating trading volumes. The courts have allowed most of this case to proceed, further entangling Binance in legal battles that could have long-term impacts on the company and the broader crypto market.
