A lawsuit brought against former Binance CEO, Changpeng Zhao by three crypto investors who accuse the exchange of losing their funds through lax money laundering regulations, may put the “efficacy of blockchain analytics itself,” on trial.
This is according to Bill Hughes, Senior Counsel and Director of Global Regulatory Matters at Consensys, who also branded the suit’s key allegations as “dubious.”
Read more: Has CZ followed a Solana news account while in prison?
The lawsuit, which was filed on August 16 in the Western District Court Of Washington, accuses Binance and Zhao of “offering bad actors a way to remove the connection between the ledger and their digital assets so the digital assets would no longer be traceable.”
It also claims that Binance’s failure to implement and maintain effective anti-money laundering (AML) and know-your-customer (KYC) rules allowed criminals to move stolen funds to Binance so it could be laundered covertly.
It said that a “core attribute” of cryptocurrency should entail, “a permanent record of those transactions on the public blockchain and the chain-of-title of cryptocurrency is permanently and accurately traceable on the blockchain.”
According to Hughes, if the lawsuit goes onto discovery, and even dispositive pre-trial motions, “then the efficacy of blockchain analytics itself and on-chain asset recovery will be on trial!”
Read more: When is Binance founder CZ coming out of prison?
Binance lawsuit lawyers smell “blood in the water”
Hughes also highlighted the impressive credentials of the lawyers backing the lawsuit. “They have represented classes suing Facebook over consumer privacy violations, opioid manufacturers over… well… opioids, and Wells Fargo over fraudulent accounts. Their pockets are deep and they smell the blood in the water,” he said.
The three plaintiffs are launching the suit on their own behalf and for any other person or entity who lost their stolen crypto before it was moved to Binance. Between the three of them, over $1.5 million was stolen and sent to an account on Binance. The suit seeks trial by jury.
Zhao is scheduled to be released from jail on September 29. He pleaded guilty to charges relating to the violation of the Bank Secrecy Act and money laundering laws and was given a four-month sentence. He has paid a $50 million fine while Binance paid $4.3 billion.
