Credit: Original article published by Crypto Briefing Blog.

In 2018, hackers stole digital assets worth $63 million in Bitcoin, Bitcoin Cash, and Monacoin from the Japanese crypto exchange, Zaif. The plaintiff now argues that Binance is partly responsible for platforming the laundering of $9.4 million in stolen funds. 

Binance’s Negligence?

Seven counts have been lanced at Binance in the United States District Court of California concerning the hack in 2018, as first reported by Coindesk. 

Fisco cryptocurrency exchange, which took over Zaif’s business after the hack and reimbursed its customers, is the complainant in the case. 

Due to Bitcoin’s transparent ledger, it was not difficult to trace the movement of the stolen funds. Soon after the hack, public analytic firms and Zaif employees traced a significant portion of the hack back to the following address 1NDyJtNTjmwk5xPNhjgAMu4HDigtobuls, which belonged to Binance. 

Fisco claims Zaif had informed Binance of the hacked BTC inflows, giving the latter ample time and opportunity to freeze the accounts.

However, Binance’s failure to cooperate with Zaif allowed the hackers to process 1,451.7 BTC, worth $9.4 million at the time, through various smaller accounts and trades on Binance. 

Crypto Briefing has reached out to Binance for clarifications on the case and the reason for their inaction. They have yet to respond.

The plaintiff Fisco and the originally hacked exchange Zaif are based out of Japan. Binance is registered in Malta and has a dozen other offices around the world, including California.

Fisco has brought the case to Californa, saying that it is home to Binance’s principal operations and also to many of the victims of the Zaif hack. 

Fisco seeks damages from Binance for the $9.4 million routed through the exchange along with interest and fair compensation, the details of which will be discussed in the trial. 

Lax Policies Promote Money Laundering

The case filing reports that Binance has become a haven for crypto criminals due to its liberal know-you-customer (KYC) and anti-money laundering (AML) policies. 

The two Bitcoin withdrawal limit allows non-KYCed users to withdraw more than $20,000 at current prices. For comparison, the withdrawal limit for “starter users” on the American exchange Kraken is $5,000. 

The case filing also cites that in 2019, the exchange facilitated the laundering of roughly $750 million obtained from illicit activities.

The amount of damages is relatively small for Binance, which is reported to have crossed $1 billion in cumulative profits within the first three years of its launch. However, the questions raised are troubling for cryptocurrency users. 

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