The company Fisco, which owns the Zaif exchange, which was hacked and stolen 6,000 BTC in 2018, sued the Binance cryptocurrency exchange for “complicity” in laundering some of the stolen bitcoins.
Shortly after 6,000 BTC worth $ 60 million were stolen from the Zaif exchange at the time of the 2018 hack, hackers sent 1,451 BTC to one of Binance’s addresses, according to a complaint filed by Fisco in the Northern California District Court.
After the hack, the Japanese Zaif exchange came under the control of the Fisco Digital Asset Group (FDAG) shortly before the restart. Fisco now claims that the attackers who hacked the exchange were laundering money through the world’s largest crypto-asset exchange Binance due to its weak KYC / AML protocols, which are “not in line with industry standards.”
The hackers allegedly took advantage of Binance’s rules, which allowed new users to open accounts and transact on the platform for amounts of up to 2 BTC per day without the need to provide any significant personal data.
“The attackers split the stolen BTC into 7,000 separate transactions and accounts, all below the 2 BTC threshold. Thus, the thieves converted the stolen BTC into other cryptocurrencies and withdrawn them from Binance, ”says Fisco.
Fisco claims that because Binance “was notified and actually knew” that the stolen bitcoins were being sent to its platform, it “could not, either intentionally or inadvertently, interrupt the money laundering process when it could.”
As such, Fisco requires Binance to pay damages equal to the amount laundered through the platform in addition to other penalties and damages. According to court records, the cryptoassets, equivalent to $ 41 million at the time of the hack, belonged to Zaif clients, including those in the United States, including California.
The case could draw additional attention to the KYC and AML procedures of cryptocurrency exchanges as the Financial Action Task Force (FATF) is urging global regulators to work in line with their guidelines issued last year.
Fisco argues that the case should be brought to a California court, not only because the victims of the hack live in this region, but also because important components of Binance’s business are located in this particular US state. For example, Fisco stated that Binance uses Amazon Web Services (AWS) to host its servers and has the ability to choose any AWS datacenter.
“Based on the information available, much, if not all, of the AWS servers that Binance relies on to operate are located in the state of California,” says Fisco.
In addition, Binance has at least six employees in California, and a significant portion of Binance’s cryptocurrency reserves are held in offline vaults located in San Francisco. Fisco is seeking a jury to try the case.
