Binance Faces Class-Action Lawsuit Over Money Laundering

A new class-action lawsuit has been filed against Binance and its founder, Changpeng Zhao (CZ), in the U.S. District Court for the Western District of Washington, accusing the cryptocurrency exchange of facilitating money laundering and causing significant harm to its users. The plaintiffs, former Binance users Philip Martin, Natalie Tang, and Yatin Khanna, allege that the platform acted as a repository for illicit funds obtained through hacks, thefts, and ransomware attacks.

The lawsuit claims that Binance's lax compliance practices allowed malicious actors to exploit the platform for laundering stolen cryptocurrency, resulting in substantial financial losses for U.S. users. The plaintiffs assert that under Zhao's leadership, Binance operated as an unlicensed money-transmitting business, intentionally ignoring anti-money laundering (AML) regulations and failing to implement adequate Know Your Customer (KYC) protocols. This negligence allegedly transformed Binance into a hub for criminals seeking to obscure the origins of their illicit gains.

This recent legal action follows a series of regulatory challenges faced by Binance. In November 2023, Zhao and Binance reached a plea agreement with the U.S. Department of Justice, resulting in a record $4.3 billion fine for violations of financial regulations. Zhao personally incurred a $50 million fine for his role in the company's misconduct, which included facilitating transactions with users from sanctioned countries like Iran and North Korea.

The plaintiffs in the current lawsuit argue that Binance's rapid growth was fueled by its deliberate evasion of U.S. regulations, which would have otherwise limited its access to the lucrative American market. As the cryptocurrency landscape continues to evolve, this lawsuit underscores the ongoing scrutiny and regulatory challenges facing major exchanges like Binance and their leaders.