Shalini Nagarajan

After being sued by the Securities &amp; Exchange Commission (SEC), Binance now faces a class-action lawsuit for allegedly profiting from transactions involving stolen cryptocurrency.



On June 5, law firm Silver Miller along with co-counsel Kopelowitz Ostrow filed the collective action against Binance and its US-based counterpart operator BAM Trading.&nbsp;



As a perquisite, it states that there are more than 100 members of the putative class and the total amount in controversy exceeds $5 million.



Michael Osterer, a resident of New York, serves as the primary plaintiff. He alleges <a href="https://www.silvermillerlaw.com/wp-content/uploads/2023/06/DE1-COMPLAINT-Class-Action-Complaint-against-All-Defendants-01456752xC1DD2.pdf" target="_blank" rel="noreferrer noopener">in a court document</a> that he lost 7.2 bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) and 449 ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>), valued at over $1 million at the time of the filing, from his Coinbase account in April 2021.



He further claimed that these funds were subsequently deposited in Binance without undergoing the necessary Know Your Customer (KYC) procedures to verify lawful ownership.



The lawsuit cites multiple allegations made in both the <a href="https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit">Commodity Futures Trading Commission&#8217;s case</a> and the <a href="https://blockworks.co/news/sec-allegations-against-binance">SEC&#8217;s case</a> against Binance as supporting evidence to establish that US citizens engage in the unauthorized use of Binance.



The plaintiff stresses that Binance is well aware of US-based users using VPN services to access its platform, despite the existence of BAM.



“Binance has a strong monetary incentive to encourage, facilitate, and allow as many transactions on its exchange as possible — even transactions involving stolen cryptocurrency,” the filing states.



“Binance has turned a blind eye to the wide variety of money and cryptocurrency laundering from around the globe it knowingly facilitates through its platform.”



Binance also allowed thieves to launder stolen cryptocurrency by neglecting to establish security measures to verify the lawful ownership of cryptocurrency held in Binance accounts, the lawsuit alleges. This includes the accounts where the plaintiff&#8217;s stolen cryptocurrency was deposited.



To date, Binance has allegedly enabled money laundering by permitting deposits and withdrawals of up to 2 bitcoin per day on the Binance.com exchange without any form of identification verification, according to the case. Blockworks has reached out to Binance for comment.



The lawsuit invites US residents who have encountered an account breach resulting in crypto theft and are interested in investigating the potential laundering of stolen crypto through Binance to contact Silver Miller. It seeks compensation for the plaintiff and other class members in accordance with applicable laws.



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Binance

Binance Legal Woes Compound in Class Action

Morgan Chittum

<div id="highlights-block_61f2d60fbec96" class="highlights">
 <ul>
 <li>The lawsuits range from allegations of copyright infringement to misleading investors</li>
 <li>Kim Kardashian, Floyd Mayweather Jr. and Quentin Tarantino have been threatened with legal action over their affiliation with crypto projects</li>
 </ul>
 
</div>



Kim Kardashian, Floyd Mayweather Jr. and Quentin Tarantino may be best known for their roles in reality television, sports and award-winning films, but recently the three have joined a growing list of celebrities being sued for their affiliation with cryptocurrency-related projects. 



On June 14, Kardashian touted token EthereumMax for all of her 250 million followers to see.&nbsp;&nbsp;



“Are you guys into crypto???? This is not financial advice but sharing what my friends just told me about the EthereumMax token,” Kardashian wrote. “A few minutes ago EthereumMax burned 400 trillion tokens — literally 50% of its management portfolio going back to the entire E-Max community. Swipe up to join the e-max community.”



Boxer Mayweather also promoted the project in the runup to a televised fight with Youtuber Logan Paul, the same month for which some tickets were available for purchase with EthereumMax tokens.



After Mayweather announced that tickets could be <a href="https://www.prnewswire.com/news-releases/huge-milestone-for-practical-use-of-emax-301300421.html" target="_blank" rel="noreferrer noopener">purchased via EthereumMax</a> tokens on May 26 the price surged, peaking on May 29 at 420 times its pre-May 26 level, according to data from <a href="https://coinmarketcap.com/currencies/ethereummax/" target="_blank" rel="noreferrer noopener">Coinmarketcap</a>. The price fell sharply within days—a decline that continued after Kardashian’s tweet. 



By July 1, two weeks after Kardashian’s post, the token’s price had fallen approximately 96% from its peak.



Seven months after the post, a <a href="https://www.classaction.org/media/huegerich-v-gentile-et-al.pdf" target="_blank" rel="noreferrer noopener">class action complaint</a> was filed against Kardashian, Mayweather, two EthereumMax executives and another public promoter of the token, former <a href="https://twitter.com/paulpierce34/status/1397628485917577217?s=20&amp;t=taLRPy-ipbWyangd6HZjgA" target="_blank" rel="noreferrer noopener">NBA player Paul Pierce.</a> The suit alleges that EthereumMax executives inflated the price of the tokens before selling theirs for a large profit. 



New York resident Ryan Huegeruch, who lost money from investing in EthereumMax tokens, filed the claim on Jan. 7 in California federal court. Court filings alleged that the defendants advertised the project to raise the price of the token at “the expense of their followers and investors.&#8221;



“The [suit] alleges a classic pump-and-dump scheme, which claims an artificially inflated price of a stock by publicly touting false and misleading statements to the market and then insiders [later sell] the stock in order to make a profit,” Braden Perry, a former CFTC enforcement attorney, told Blockworks.&nbsp;



“The celebrities are paid for promotion, but typically do not know much about the underlying technology,” Perry said. “Nevertheless, such activity is considered market manipulation for all involved, including the celebrity promoters.”



The complaint alleged that the post from Kardashian had “tremendous reach.” According to a <a href="https://morningconsult.com/2021/09/21/kim-kardashian-crypto-celebrity/" target="_blank" rel="noreferrer noopener">survey</a> by financial services firm Morning Consult, 21% of all adults in the US had seen, read or heard about the post. Roughly a fifth of those who said they&#8217;d heard about the post invested in EthereumMax, the consultancy reported. 



Head of the UK’s Financial Conduct Authority Charles Randell <a href="https://www.fca.org.uk/news/speeches/risks-token-regulation" target="_blank" rel="noreferrer noopener">said</a> that Kardashian’s Instagram post may have been “the financial promotion with the single biggest audience reach in history.” 



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="979" height="710" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png" alt="" class="wp-image-16168" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=979 979w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=354 354w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=302 302w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/kardashianTweet.png?w=50 50w" sizes="auto, (max-width: 979px) 100vw, 979px" /></figure></div>



“The kinds of people that have been convinced by Kim Kardashian [to invest] probably shouldn&#8217;t be buying [crypto] anyway,” Stephen Young, founder of NFT marketplace NFTFi, told Blockworks.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I think [these lawsuits] are probably scaring some people away [from investing] but honestly, if that’s what made them decide to buy crypto they were going to lose their money anyway because they didn&#8217;t actually understand what they were doing.”</blockquote>



Director Quentin Tarantino is also facing an ongoing legal battle over his sale of NFTs based on his cult movie Pulp Fiction.&nbsp;



On Nov. 16, Miramax, the Hollywood studio that produced the 1994 movie, filed a lawsuit accusing Tarantino of committing trademark infringement, breaching his contract, copyright infringement and of unfair competition.&nbsp;



Miramax attorney Bart Williams accused Tarantino and his team of a “deliberate, premeditated, short-term money grab,” describing their actions as “profoundly disappointing,” according to a <a href="https://embed.documentcloud.org/documents/21111461-miramax-tarantino-nft/?embed=1&amp;responsive=1&amp;title=1" target="_blank" rel="noreferrer noopener">court filing</a>. 



However, the 58-year-old filmmaker has pushed forward with his <a href="https://cms.blockworks.co/quentin-tarantino-pushes-forward-with-pulp-fiction-nft-plans-despite-lawsuit-from-miramax/" target="_blank" rel="noreferrer noopener">non-fungible tokens plan </a>despite threats of legal action. The first of seven digital collectibles from the collection, which promise personalized audio commentary from the director himself, sold for $1.1 million at auction. 



“Celebrities are an easy target for [lawsuits] as typically they have deeper pockets than the company or company insiders,” Perry, the former CFTC enforcement attorney, said. “And with celebrities, it’s a very public battle, and underlying facts will dictate who’s right and who’s wrong. And whoever’s wrong may be looking at significant penalties from civil litigation and regulatory scrutiny.”



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