Binance landed in a fresh trouble on Monday as the world’s largest cryptocurrency exchange was sued in a U.S. court by the Japanese crypto platform Fisco.
According to a 33-page lawsuit filed by Fisco in the Northern California District Court on the 14th of September, Binance allegedly facilitated the laundering of over $9 million of stolen cryptocurrency after another Japanese crypto exchange, Zaif was hacked in 2018. Cryptocurrency exchange, Fisco acquired Zaif shortly after the hack.
The plaintiff accused Binance’s “lax policies” for know-your-customer [KYC] and anti-money laundering [AML] protocols which allowed the hackers to transfer the stolen funds. Fisco further maintained that the CZ-led exchange was fully capable of freezing those accounts and stop transactions on its platform involving the stolen
funds and return them to the Zaif exchange, but failed to do so. The complaint read,
“Binance could have done so before some or all of the stolen cryptocurrency left the Binance exchange, but it did not do so. Binance either intentionally or negligently failed to interrupt the money laundering process when it could have done so.”
But why was the lawsuit filed in California Court?
Fisco presented several arguments evidencing as to why Northern California was the proper jurisdiction for suing the cryptocurrency exchange. Firstly, in its complaint, Fisco stated that Binance has used servers and data centers provided by Amazon Web Services [AWS] for its business operation. The complaint further alleged Binance “purposely directed its activities toward California” and benefitted itself of the privileges of conducting activities in the region.
The plaintiff also claimed that the customers of the hacked exchange, who were Californian residents, “suffered harm” because of Binance’s “unreasonable KYC-AML procedures” which encouraged hackers by providing them a
marketplace to easily launder their “stolen digital loot”. It further conceded,
“Zaif and all Zaif customers affected by the hack, whose claims now belong to, and are being asserted by, Plaintiff, suffered harm in California when their cryptocurrency was stolen and laundered through Binance’s servers in California.”
Fisco is now seeking the value of the laundered Bitcoin with the interest from that time, in addition to fair compensation for the time and money spent in pursuit of the property.