- A group of investors have launched a class action lawsuit against Binance and its former CEO Changpeng Zhao (CZ) claiming the exchange allowed thieves to launder their stolen assets by failing to implement proper anti-money laundering protections.
- The investors allege that if not for Binance providing a platform for criminals to easily launder stolen assets, blockchain’s inherent traceability would’ve allowed them to recover their assets.
- In related news, prison records circulating on X / Twitter show that CZ has been transferred from prison to a halfway house in preparation for his full release from custody.
It looks like former Binance CEO, Changpeng Zhao (CZ), has checked out of the big house and is now holed up in a smaller, cosier house — specifically, a halfway house. According to prison records circulating on X / Twitter, CZ’s new lodgings are a transitional arrangement before his full release, which is scheduled for September 29.
While his stint in prison may be coming to an end, CZ’s legal troubles continue. A group of three crypto investors have launched a class-action lawsuit against CZ and Binance. The investors allege that thieves stole their crypto and essentially used Binance to launder the assets, rendering them untraceable and unrecoverable. They say this was only possible because Binance, under CZ’s leadership, failed to implement proper money laundering protections.
Related: Judge Dismisses SEC Claims Against Binance, Cites Lack of Clarity in Crypto Securities Classification
CZ’s Legal Woes Continue with Class Action Suit
This latest lawsuit against CZ and Binance was filed in the US District Court for the Western District of Seattle, Washington on August 16. The plaintiffs allege that after their assets were stolen, the thieves sent them to Binance with the intention of removing “the connection between the ledger and their digital assets”, effectively rendering the assets untraceable.
The plaintiffs also argued that by failing to prevent money laundering Binance essentially undermined one of the key potential benefits of blockchain technology, traceability. The suit claims that without organisations like Binance to launder assets, blockchain tech makes theft inherently high risk as all transactions are recorded on the ledger forever:
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.
Class action lawsuit against Binance and Changpeng Zhao
The lawsuit claims that in providing this money laundering platform Binance violated the Racketeer Influenced Corrupt Organisations (RICO) Act.
Lawsuit Bad for Crypto If It Progresses to Trial
Posting on X / Twitter, Bill Hughes, a lawyer at Consensys and formerly the US Department of Justice, said that if this suit made it to discovery it could be bad for crypto as a whole—as Binance would be incentivised to denigrate the power of blockchain analytics and the technology’s inherent traceability:
Oh the things that Binance would be incentivized to say about tracing and recovery – kinda a tough position to be in, honestly, if you care anything about the industry.
Bill Hughes, Lawyer at ConsensysHughes added that he thinks it’s unlikely to get that far, suggesting CZ will probably pay to settle the case before too much harm is done:
It probably won’t [make it to discovery] – CZ gonna open up that wallet and make it go away at some point.
Bill Hughes, Lawyer at ConsensysHe said if it did go to trial he’s doubtful the plaintiffs could reach the burden of proof required to prove their assets would’ve been recoverable if not for them being laundered through Binance, saying:
Whether they can satisfy their burden on this key allegation is dubious, if you ask me.
Bill Hughes, Lawyer at ConsensysCZ’s Long March to Freedom
There had been rumours swirling that CZ had been fully released from prison, but according to the inmate records doing the rounds on X / Twitter, CZ has in fact just been transferred from FCI Lompoc II, a low-security federal prison located in California, to RRM Long Beach, a halfway house.
Related: Binance Founder CZ Sentenced to Four Months in Prison
CZ pleaded guilty in November 2023 to breaches of US anti-money laundering laws and was sentenced to a four-month prison term in April. The former Binance CEO began his stint in the slammer in June and is scheduled for full release at the end of September. As part of his plea deal, CZ also agreed to step down as the CEO of Binance.
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