Binance Faces Fresh Lawsuit Over Alleged Money Laundering Failures
In a new class-action lawsuit filed in the U.S. District Court for the Western District of Washington, cryptocurrency exchange Binance and its former CEO Changpeng Zhao are facing allegations of enabling widespread money laundering on the platform.
The lawsuit, brought by three individual crypto investors – Philip Martin, Natalie Tang, and Yatin Khanna – claims that Binance’s negligent compliance practices allowed bad actors to use the exchange to launder stolen cryptocurrencies, causing significant financial harm to users.
According to the plaintiffs, their cryptocurrencies were stolen and then funneled through Binance in an effort to “disconnect the ledger from their digital assets,” making the stolen funds virtually untraceable. The lawsuit alleges that this activity constitutes a violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act.
“Without a place to launder crypto, such as Binance.com, if a bad actor steals someone else’s crypto, there is a risk that the authorities would eventually track them down by retracing their steps on the blockchain,” the lawsuit states.
The plaintiffs argue that Binance, under the leadership of Changpeng Zhao, operated as an unlicensed money-transmitting business and willfully ignored anti-money laundering (AML) requirements, effectively turning the exchange into a hub for laundering illicit funds.
This latest legal challenge comes on the heels of Binance’s previous settlements with U.S. authorities. In 2023, the exchange agreed to pay over $4.3 billion in fines to the Department of Justice and an additional $2.85 billion to the U.S. commodities regulator to resolve claims related to AML violations and sanctions laws. As part of the settlement, Zhao also stepped down as CEO and pleaded guilty to one count of violating AML rules.
Legal experts have noted that if the new class-action lawsuit progresses, it could put the “efficacy of blockchain analytics itself and on-chain asset recovery” on trial, potentially reshaping the regulatory landscape for the entire cryptocurrency industry.
