Japanese exchange says Binance laundered over $9 million

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Fisco, the Japanese digital currency exchange, has sued Binance for allegedly laundering stolen digital currency. On September 14, Fisco filed a lawsuit against Binance in the Northern California District Court and is looking to collect over $9 million in damages.

Binance laundered stolen funds

In 2018, Zaif—the name Fisco previously went by before it was acquired—was hacked for $63 million worth of digital currency. During the breach, hackers stole 6,000 BTC, as well as an unknown amount of BCH and MonaCoin. Subsequently, the hackers sent 1,451 of the stolen BTC—worth $9.4 million at the time—to Binance and used the Binance exchange to liquidate the stolen funds. According to Fisco, the hackers used the platform because “Binance’s “know your customer” and anti-money laundering protocols are shockingly lax and do not measure up to industry standards.” 

According to the Fisco,

During the times relevant to this action (the liquidation via Binance), and continuing to date, Binance has facilitated money laundering by allowing deposits and withdrawals of up to 2 bitcoins per day though the Binance.com exchange without any form of identification verification. To launder stolen bitcoin, a person created an account by accessing the Binance website. To trade or withdraw up to 2 bitcoins per day, the user did not need to provide even the most basic identifying information, such as name, date of birth, address, or other identifiers. All Binance required was a password and an email address.

Fisco went on to say that,

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. In short, Binance served as both a receptacle and transmitter of criminal funds. 

Fisco claims that they notified Binance and asked them to freeze the funds once they discovered that BTC stolen from their exchange had been sent to Binance. However, they say that Binance ignored the request and did nothing to stop the laundering.

Why press charges in California?

Fisco chose to file the lawsuit in California because Binance operates its business off of Amazon Web Services computer servers and data centers—and Northern California is one of the four AWS regions in the United States.

Fisco also chose California because they claim Binance employs several executives that reside in California.

Another reason that Fisco may have chosen to press charges in the United States is because the U.S. Securities Exchange Commission (SEC) has their eye on Binance’s operations. Recently, the SEC extended a blockchain analytics contract to Elliptic because they were the only firm that could track Binance transactions.

It is no secret that Binance’s operations are borderline criminal, but this time around, it looks like Binance will be served justice via the legal system.

We will keep you up to date as the story continues to develop.