Following the massive settlement deal and imprisonment of CZ over money laundering concerns, opportunistic class action lawyers are now seeking to sue Binance and CZ, with a rather novel suggestion that Binance's anti-money laundering failures led to the loss of assets of victims of fraud, specifically that proceeds of fraud were laundered through Binance but due to the exchanges failures the assets could not be traced further.
The lawsuit alleges that:
Binance.com became a preferred-choice as the “get-away driver” for a large number of bad actors
and goes on to refer to Binance as the "Binance Crypto-Wash Enterprise" as well as seeking to activate the US RICO laws (Racketeer Influenced and Corrupt Organizations Act) which permit triple damages to successful plaintiffs.
The heart of the claim is that Binance is alleged to have "aided and abetted" criminals by failing to have an "adequate" or compliance AML/CTF program.
If not settled (and class actions like these often settle) there may be interesting defences available to Binance including whether a compliant AML/CTF program would have assisted at all in recovering funds. In most scams where a user willingly transfers crypto-assets to an exchange account or wallet which then moves funds to an exchange account, the exchange has little to no ability to identify the scam or fraud until the wallets used are flagged as illicit.
There also may be interesting challenges as to the usefulness of on-chain tracking of transactions, as a core argument of the claim is that, absent Binance being involved, on-chain tracking of the assets could have permitted recovery. This seems a fairly challenging argument to run and likely to be a point of defence for Binance. Prominent lawyer Bill Hughes commented that he thought it was "dubious" that the claim could be made out, but that the case would probably settle before reaching discovery.
By Michael Bacina
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