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Fisco accuses Binance of helping launder funds from its 2018 hack

A Japanese cryptocurrency exchange has accused Binance of playing a role in laundering funds that were hacked from its platform in 2018.

A Japanese cryptocurrency exchange, Fisco, formerly known as Zaif, has accused Binance of helping launder $9 million from its platform hack in 2018. Zaif lost $60 million in a cyber-attack in 2018, and the exchange is suing Binance for aiding and abetting the laundering of $9 million from the funds.

The details were contained in a complaint filed by Fisco in the Northern California District Court yesterday. According to Fisco, shortly after losing roughly 6,000 bitcoins in the 2018 attack, the hackers transferred  1,451 bitcoins to a Bitcoin address belonging to Binance. The transferred coins at the time were worth $9.4 million.

Fisco added that the hackers proceeded to launder the money via the leading cryptocurrency exchange. The Japanese exchange maintained that the know-your-customer (KYC) and anti-money laundering (AML) protocols on Binance were not up to industry standards, making it easy for the hackers to launder money through the exchange.

According to the complaints filed by Fisco, the hackers leveraged Binance’s policy that allows new users to open an account with their platform and transact in amounts less than 2 BTC without providing their identity information. Fisco claims that crypto exchanges like Binance know that failure to implement proper KYC and AML procedures facilitates violations of the anti-money laundering laws.

Fisco stated that “The thieves broke the stolen bitcoin into seven 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.”

The Japanese cryptocurrency exchange added that Binance was notified and knew about the stolen funds transferred to its platform. Hence, Binance, either intentionally or negligently refused to halt the money laundering process when it had the power to do so. Due to its role in the money laundering process, Fisco is demanding that Binance pays for the losses it incurred and other punitive damages.

Zaif suffered irreparable damages following the 2018 hack. The exchange was sold to Fisco following the attack, with Fisco compensating the users for the lost funds in the attack. According to the court filing, $41 million worth of cryptocurrencies from the hack belonged to customers of the Zaif exchange, including those living in the United States and California.

Binance is yet to issue any response to the allegations made by Fisco.

The Japanese cryptocurrency exchange wants the trial to hold in California as most of the victims reside in the region and the critical components of Binance’s businesses are located in the state. Binance has maintained several times that it doesn’t have any traditional physical office headquarters anywhere in the world.

Fisco insists that Binance currently employs half a dozen employees in California, and most of the company’s cryptocurrency reserves are stored in offline hardware facilities within the San Francisco Bay Area. The Japanese trading platform wants a jury trial over this case.

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