Japanese crypto exchange sues binance for role in laundering

Binance, one of the world’s largest crypto exchange, is on the hotseat for lax regulatory policies

Image of a finger pressing the Binance logo
These events raise uncomfortable questions for millions of cryptocurrency users that operate on the platform.

Fisco, the cryptocurrency exchange that took over Zaif, has alleged that Binance has played a role as the platform of choice for hackers that laundered stolen funds back in 2018.

The hackers took off with digital assets worth $63 million in Bitcoin, Bitcoin Cash, and Monacoin in September 2018. Zaif’s court filings now accuse Binance of continuing to implement “lax” policies against hackers and laundered money, which allowed the hackers to move $9.4 million of the stolen funds.

Ziaf is a cryptocurrency exchange based in Osaka, Japan. It was established in 2014.

Following the hack in 2018, its employees collaborated with public analytics firms to trace a significant portion of the hack back to an address owned by Binance.

Fisco claims that Zaif had given notice to Binance regarding the hacker bitcoin inflows and had given the company plenty of time and opportunity to freeze the accounts. However, Binance’s inability to cooperate with the crypto exchange gave the hackers the leeway to process 1,451.7 BTC, which was worth $9.4 million at the time, throughout a variety of smaller accounts and trades across Binance.

Fisco seeks damages from Binance over the $9.4 million that made its way through the exchange, along with interest and fair compensation. More details regarding the latter will be discussed in the trial.

The case filing claims that Binance has turned into a haven for crypto criminals because of its easy going know your customer (KYC) and anti-money laundering (AML) policies. It pointed to the platform’s Bitcoin withdrawal limit, which allows users that have not completed their KYC obligations to withdraw more than $20,000 at current prices.

For comparison, users that have not yet been verified on Kraken, an American crypto exchange, can only withdraw $5,000.

In addition to this, the case filing also claims that the exchange was a platform for the laundering of around $750 in cryptocurrency, mostly obtained from illicit activities.

A report that was recently released by the Financial Action Task Force (FATF) appeared to have singled out Binance as a red flag crypto exchange. While the report did not explicitly name exchanges, it did state that users must exercise caution when transacting with exchanges with low AML regulations.

It also narrated the journey of a particular exchange across several jurisdictions in its aversion to enhanced regulatory oversight. Many speculate that the exchange is likely to be Binance, which was initially set up in China, moved to Japan, and then moved to Malta.

After Maltese authorities reported that Binance was never licensed in the country, the company has not given a clear indication of its current jurisdiction.

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