Binance sued for reportedly facilitating money laundering with ‘lax KYC’. Binance’s popular light Know Your Customer requirements are being targeted by the current owners of Zaif, a Japanese cryptocurrency exchange that got hacked in 2018.
Plaintiffs alleged that its weak KYC requirements and high daily withdrawal limit facilitated the laundering of $60 million stolen from the exchange. Representatives of Fisco cryptocurrency exchange, which acquired Zaif soon after the hack filed the lawsuit in the Northern District of California.
Fisco is charging Binance of helping launder $9 million in cryptocurrency, and is seeking compensation for these alleged losses. The plaintiffs maintain that Binance had the power to identify and halt the stolen assets due to the traceable nature of blockchain.
A significant portion of the case document attempts to show the reason Northern California is the appropriate jurisdiction for suing Binance, which has a globally dispersed team and is likely to be legally located in a tax haven region.
The first line of reasoning is that the servers of Binance are based in California, and they use Amazon Web Services. The paper acknowledges that the cloud provider has worldwide coverage that can be transferred at will but it also says much of the technology is in California. While Binance’s Californian AWS servers might have more data than others, the website itself is served from the location closest to the user.
A further argument is that Binance uses California-based custodians for cold storage. This claim comes from reports that Binance-acquired Swipe uses Coinbase and BitGo, while FTX — where Binance is just an investor — reportedly uses Coinbase. There are no indications as to which service is used by Binance itself, and it may well be developed in-house.
Fisco is accusing Binance of several counts of crimes related to facilitating money laundering, seeking the return of 1,457 Bitcoin (BTC) that was reportedly laundered through Binance, plus punitive damages and legal expenses.
