Barely 8 months after reaching a settlement with the Commodity Futures Trading Commission (CFTC), Binance and its former CEO, Changpeng Zhao is now embroiled in another legal battle. In a Wednesday legal filing, the exchange alongside Zhao was accused of running a sham compliant program, thereby enabling a series of money laundering activities.
The plaintiffs led by three known crypto investors, Philip Martin, Natalie Tang, and Yatin Khanna filed the lawsuit with the United States Western District Court of Washington. These individuals claim Binance’s negligent practices paved the way for their crypto assets to be laundered on the exchange. None of these individuals have a trading account with Binance. But they insisted that bad actors moved their funds to its platform.
Martin and Tang for instance alleged that crypto funds worth tens of thousands of dollars were moved from their Coinbase account to Binance, where they were eventually laundered. While Khanna failed to mention the platform’s name, he claimed to have lost $1.5 million to Binance’s money laundering practices.
Plaintiffs say Binance empowered bad actors with its negligence to regulations
All parties in the lawsuit described Binance as the favorite destination of bad actors due to its non-compliance with regulations. In the legal filing, they said the bad actors successfully laundered people’s funds by swapping stolen funds for legitimate ones on Binance, thereby averting any form of traces.
Meanwhile, this new legal filing comes just a few months after Binance formalized a settlement with the CFTC. After pleading guilty to the charges, Binance reached an agreement to pay billions of dollars in fines. As part of the agreement, Zhao stepped down as the CEO of the exchange and paid $150 million in fines.
Beyond the United States, the exchange also faces a class-action lawsuit in Canada. Last April, it was used for allegedly violating local securities laws in the country. Filed with the Ontario’s Superior Court of Justice, the plaintiffs alleged that Binance sold crypto derivative products without registration. The plaintiffs want damages and rescission of all the illegal derivatives trades carried out by the exchange.
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