Binance Sued After $30 Million in Crypto Stolen From Customers Wallet

The plaintiff alleged five causes of action, including RICO, through what he characterized as the “Binance crypto-wash enterprise.”

Attorneys have sued Binance in a federal district court in Newark after a variety of cryptocurrencies valued at $30 million was stolen from their client and allegedly laundered through the global company’s exchange.

Jose Ceide, a partner at Salazar Law in Miami, specializes in cryptocurrency litigation and is not involved in the underlying case between the plaintiff, David Gonzalez, and the defendant, BAM Trading Services Inc., which operates Binance.US and shares common majority ownership with the holding company that operates the Binance.com platform.

Ceide said one of the biggest challenges in these systemic cases is proving the location of the digital assets because hackers employ various methods, such as using “crypto mixer services” or “old-school money laundering services on the dark web,” to obfuscate the identities of the people who transfer the currency.

“Once they steal the currency from a wallet or an exchange, they don’t put it in another spot and then leave it there,” Ceide said. “It is taken to another platform, moved across blockchains and multiple exchanges in rapid succession, and if there is a transaction, it occurs after that. It is very difficult and almost impossible to track.”

Eric James Warner and Robert A. Tandy, solo practitioners based in New Jersey who represent Gonzalez, and the defendants did not respond to a request for comment.

Binance, founded in 2017, allows its customers to make highly leveraged bets on more than 300 crypto assets, and at its peak in early 2023, processed tens of billions of dollars in trades each day. However, because of restrictions on Binance operating in the U.S., BAM was founded in 2019 to cater to U.S. customers.

Still, Binance remains highly popular with U.S. customers, and the plaintiff claimed in the lawsuit that it encouraged its customers to use a virtual private network to bypass the restrictions. VPNs scrambled the IP address, so it appeared that the user was in a different area of the world. In addition, the plaintiff asserted that Binance and BAM’s finances were closely intermingled.

The plaintiff claimed in the lawsuit that lax internal regulations allowed Binance to act as a depository for digital assets stolen from U.S. citizens, such as his 41 billion units of Shiba Inu, 90 trillion units of Hokkaidu, and trillions of units of additional cryptocurrencies.

The plaintiff alleged in the lawsuit that at some point, hackers deposited his crypto with the defendants; however, Binance refused to acquiesce to his repeated demands, spanning over one year, that the company return them to him.

Now, the case is pending before U.S. District Judge Brian Martinotti of the District of New Jersey. And in the 53-page complaint, the plaintiff alleged that Binance engaged in conversion, aiding and abetting conversion, unjust enrichment, and violations of the Racketeer Influenced and Corrupt Organization Act through what he characterized as the “Binance crypto-wash enterprise.”

“As a result of defendants’ illegal scheme and conspiracy, plaintiff had crypto taken from him as a result of hacks, ransomware, or theft and laundered at Binance.com,” the plaintiff claimed. “But for defendants’ scheme, plaintiff would not have had their crypto stolen and then laundered at Binance.com so that the crypto was no longer traceable on the blockchain.”

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