One legal expert said that if the class action lawsuit moves forward, it could lead to a trial on the “validity of the blockchain analysis itself.”
Binance and its former CEO CZ are facing a new class-action lawsuit from three cryptocurrency investors who claim they are unable to recover stolen assets because the exchange failed to prevent money laundering.
In a class action lawsuit filed on August 16 in the U.S. District Court for the Western District of Seattle, Washington, plaintiffs claim that their cryptocurrencies were stolen and that the thieves sent the funds to Binance to “sever the connection between the ledger and their digital assets,” rendering the funds untraceable.
Three plaintiffs have filed a civil lawsuit against Binance and its former CEO CZ. Source: PacerMonitor
The plaintiffs argue that a key attribute of crypto transactions is the “permanent record of those transactions” on the blockchain, which makes them “permanently and accurately traceable.”
“Thus, without laundering sites like Binance.com, if there were bad actors stealing other people’s cryptocurrency, authorities could eventually find them by tracing their movements on the blockchain,” the class action lawsuit states.
The plaintiffs allege that Binance was an integral part of the money laundering process, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
Binance in Trouble Due to Class Action Lawsuit
Bill Hughes, senior counsel and director of global regulatory affairs at ethereum development company Consensys, said he was “skeptical” the lawsuit would prove the allegations.
Hughes said in an Aug. 20 X post that the new class action lawsuit is a "natural and foreseeable follow-on civil lawsuit" designed to take advantage of the government prosecution.
However, Hughes also said the lawsuit puts Binance in a “difficult situation,” and said that if the lawsuit goes to trial, it could have a significant impact on the cryptocurrency industry.
Source: Bill Hughes
“If the case progresses to the investigative stage, or even to the decisive pretrial motion stage, the effectiveness of blockchain analysis itself and on-chain asset recovery will be put to the test,” he said.
Hughes added: “If you care about the industry, Binance is being forced to talk about trace and recovery — it’s a tough position to be in, to be honest.”
The effectiveness of blockchain analysis itself and on-chain asset recovery will be put to the test.
In November 2023, CZ pleaded guilty to violating U.S. money laundering laws and resigned as Binance CEO as part of a settlement with authorities. Binance agreed to pay a $4.3 billion fine for a “civil regulatory enforcement action.”
In April, a federal judge sentenced CZ to four months in prison, less than the three years federal prosecutors had requested. CZ began serving his sentence in June and is due to be released in September.
The SEC also filed a lawsuit against Binance in June 2023. The commission accused Binance and CZ of misleading the SEC about its market surveillance controls and artificially inflating its trading volume. On June 28, the court approved most of the case to go to trial.
The author is contacting Binance for comment, but has not received any response as of the time of publication. Mars Finance continues to report for you.
