Japanese Crypto Exchange Accuses Binance of Helping Launder $9M From 2018 Hack

Sep 15, 2020 at 07:55 UTCUpdated Sep 15, 2020 at 15:02 UTC.Binance CEO Changpeng Zhao.A Japanese cryptocurrency exchange that suffered from a $60 million hack in 2018 is suing Binance for "Aiding and abetting" the laundering of some of the stolen funds.

According to a complaint filed by Fisco in the Northern California District Court on Sept. 14, the Japanese exchange alleged that soon after it lost nearly 6,000 bitcoin in the 2018 hack, the thieves sent 1,451 bitcoin to an address belonging to Binance, which was worth $9.4 million at the time.

The thieves are claimed to have taken advantage of Binance's policy that allowed new users to open accounts and transact on the platform in amounts fewer than two bitcoins without needing to provide any meaningful identifying information.

"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 plaintiff said.

Fisco is demanding Binance to pay for its loss of the laundered funds in addition to other punitive damages.

Fisco said Binance uses Amazon Web Services to host its servers and has the ability to select whichever AWS data center it chooses for its operations.

The argument comes after repeated statements made by Binance that it has no traditional physical headquarters anywhere in the world.

"Upon information and belief, a significant portion if not all of the AWS servers Binance relies on for its operations are located in the State of California. Upon information and belief, the AWS Region and AWS Availability Zones housing Binance's digital data used to run its technical platform are located in California," Fisco said.

In addition to Binance having hired half a dozen employees in California, Fisco argued that a significant portion of Binance's cryptocurrency reserves is also stored in offline hardware facilities located in the San Francisco Bay Area that are controlled and managed by custodians headquartered in the region.

On July 7, 2020, Binance acquired cryptocurrency startup Swipe. Binance admits that Swipe uses Coinbase and Bitgo, both of which are located in the San Francisco Bay Area, to custody the cryptocurrency used in Swipe's business," the plaintiff said.