Japanese cryptocurrency exchange Fisco has sued leading crypto exchange Binance for allegedly facilitating the laundering of $9 million in bitcoin.
According to a 33-page complaint filed in the Northern California District Court on September 14, the Japanese cryptocurrency exchange is accusing Binance of “aiding and abetting” the laundering of 1,451 BTC – then worth $9.4 million – on its platform, after thieves sent the funds to an address belonging to it.
The funds came from the $60 million hack the cryptocurrency exchange Zaif suffered in 2018, when hackers stole nearly 6,000 bitcoins from its wallets. Fisco bought Zaif later on, and now claims that the funds were laundered because of Binance’s allegedly “lax” know-your-customer (KYC) and anti-money laundering (AML) protocols that 2do not measure up to industry standards.”
Per the complaint, the hackers took advantage of Binance’s KYC policy, which allowed new users to trade up to 2 BTC without having to provide the exchange any meaningful identifying information. The complaint reads:
The thieves broke the stolen bitcoin into thousands of separate transactions and accounts, all valued below the 2-bitcoin threshold. In this way, the thieves converted the stolen bitcoin into other cryptocurrencies and transmitted the value from the Binance platform.
Zaif employees reportedly contacted Binance at the time, warning the exchange the hackers were splitting the funds into numerous addresses to launder them. To Fisco, Binance “either intentionally or negligently failed to interrupt the money laundering process when it could have done so.”
Fisco is, as such, demanding Binance to pay for the $9 million, with interest, and “fair compensation for the time and money spent in pursuit of the property.” After the acquisition, Fisco compensated users who lost funds in the security breach. According to the court filing, $41 million worth of cryptoassets from the hack belonged to Zaif customers.
openNotably, the case was brought to trial in the California court, according to Fisco, because some of the victims were based on the region, and because “critical components” of Binance’s business are located there. The exchange allegedly uses Amazon Web Services (AWS) to host its servers, and Fisco says a “significant portion if not all of the AWS servers Binance relies on for its operations are located in the State of California.”
The firm also added that Ba portion of Binance’s cryptocurrency reserves are stored in offline hardware facilities located in the San Francisco Bay Area, and are controlled and managed by custodians.
One stated example was that o Swipe. Binance acquired the crypto debit card issuer earlier this year, and the complaint adds Swipe uses coinbase and BitGo as custodians, both of which are located in the area.
