A lawsuit filed by three crypto investors against former Binance CEO Changpeng Zhao could test the “effectiveness of blockchain analysis itself.” They accuse the exchange of losing their funds due to lax anti-money laundering regulations.
This is the view of Bill Hughes, senior counsel and director of global regulatory matters at Consensys, who also described the main allegations in the lawsuit as “questionable.”
Read more: Did CZ stalk a Solana news account from prison?
The lawsuit, filed on August 16 in the Western District Court of Washington, accuses Binance and Zhao of “providing malicious actors with a way to remove the link between the ledger and their digital assets, making the digital assets untraceable.”
It is also alleged that Binance’s failure to implement and maintain effective anti-money laundering (AML) and know-your-customer (KYC) rules enabled criminals to Transfer stolen funds to Binance so that it could be washed secretly.
It states that a “core feature” of cryptocurrencies should be that “a permanent record of these transactions is maintained on the public blockchain and the chain of ownership of the cryptocurrency is permanently and accurately traceable on the blockchain.”
According to Hughes, if the lawsuit goes to discovery and even pre-trial motions to open the case, “the effectiveness of blockchain analysis itself and the recovery of assets on the blockchain will be put to the test!”
Read more: When will Binance founder CZ get out of prison?
Lawyers in the Binance trial smell “blood in the water”
Hughes also highlighted the impressive credentials of the lawyers supporting the lawsuit. “They have represented classes suing Facebook for consumer privacy violations, opioid manufacturers for… well… opioids, and Wells Fargo for fraudulent accounts. They have deep pockets and they smell the blood in the water”, he said.
The three plaintiffs are bringing the suit on behalf of themselves and any other person or company who lost their stolen cryptocurrencies before they were transferred to Binance. In total, over $1.5 million was stolen from the three and transferred to a Binance account. The suit is set to go before a jury trial.
Zhao is scheduled to be released from prison on September 29. He pleaded guilty to violating bank secrecy and money laundering laws and was sentenced to four months in prison. He paid a fine of $50 million, while Binance paid $4.3 billion.
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