Binance, one of the world’s largest cryptocurrency exchanges, is once again under fire. This time, more than 300 victims and family members of the Hamas-led October 7, 2023 attacks filed a lawsuit in a U.S. federal court. The complaint alleges that Binance “knowingly facilitated” hundreds of millions of dollars in crypto transfers for Hamas, Hezbollah, and other U.S.-designated foreign terrorist organizations (FTOs). (The Block)
Background: What the Lawsuit Alleges
The central claim is straightforward but highly serious: Binance, along with its founder Changpeng “CZ” Zhao and executive Guangying Chen, is being sued under U.S. anti-terrorism law (specifically the Justice Against Sponsors of Terrorism Act, a provision of the Anti-Terrorism Act). (The Japan Times)
According to the complaint, Binance:
- Failed to monitor incoming funds properly, allowing sanctioned organizations to exploit the platform. (Yahoo)
- Used omnibus wallets (wallets that mix many users’ funds), weak identity-verification checks, and limited record-keeping — making it difficult to trace where money was really going. (Yahoo)
- Permitted accounts under seizure orders to shift money internally — basically letting risky users dodge enforcement by moving funds within Binance’s system. (Yahoo)
- Neglected to file Suspicious Activity Reports (SARs) with U.S. regulators. Between July 2017 and July 2023, plaintiffs say Binance didn’t file a single SAR related to Hamas or similar groups — a potential violation of U.S. anti–money laundering regulations. (seidenlaw.com)
Because of these alleged failures, the plaintiffs argue that Binance actively “provided substantial assistance” to FTOs — financial lifelines that sustained terrorist operations. (Cointelegraph)
The Scale of the Alleged Transfers
The lawsuit claims more than $1 billion worth of crypto flowed through Binance to wallets tied to terror groups. (www.ndtv.com) This is significantly higher than prior public estimates: in 2023, U.S. authorities had disclosed only about $2,000 in crypto linked to Hamas. (Yahoo)
Plaintiffs further allege forensic evidence connects Binance activity to accounts in Gaza, Lebanon, Venezuela, and even in North Dakota. (Finance Magnates) If these claims hold up, they suggest Binance’s platform was used across multiple jurisdictions to channel funds to FTOs.
Legal Claims and Court Proceedings
The plaintiffs brought their suit in U.S. District Court for the District of North Dakota, invoking the Anti-Terrorism Act. (Yahoo) The amended complaint argues that Binance had a legal duty to implement strong anti-money laundering (AML) controls, conduct customer due diligence, and file SARs when suspicious activity was detected. (seidenlaw.com)
In response, Binance and the other defendants have filed motions to dismiss. Their legal teams argue that:
- There is no special relationship between Binance and Hamas. (coinglass)
- The evidence presented by plaintiffs isn’t legally sufficient. (Cointelegraph)
- Binance insists it “complies fully with internationally recognized sanctions laws,” like other regulated financial institutions. (The Block)
A judge will first decide whether the case has enough legal standing (jurisdiction), then whether the complaint is strong enough to survive dismissal. (Justia Law)
Historical Context: Binance’s Prior Legal Troubles
This lawsuit doesn’t exist in a vacuum. Binance has already faced major legal consequences in the U.S.:
- In November 2023, Binance and Zhao pleaded guilty to violating anti–money laundering laws (the Bank Secrecy Act). Binance agreed to pay $4.3 billion in penalties. (WIRED)
- Zhao stepped down as CEO, paid fines, and later served four months in prison, after which he was released. (AP News)
- Regulators, including the U.S. Department of Justice, highlighted that Binance neglected to report over 100,000 suspicious transactions connected to organizations like Hamas, ISIS, and al-Qaeda. (Reuters)
Reports suggest that, internally, Binance executives knew of Hamas-linked activity. According to a Commodity Futures Trading Commission (CFTC) complaint, an internal Binance message acknowledged “HAMAS transactions.” (Bloomberg)
Why These Allegations Are Especially Serious
These claims carry weight not only because of the scale but also due to the nature of the groups involved. Hamas and the other organizations named in the lawsuit are formally designated by the U.S. as terrorist groups. (The Block) If Binance did, indeed, enable their financial operations — even indirectly — it could mean the company played a role in facilitating violence, hostage-taking, and large-scale terror attacks.
From a regulatory perspective, financial institutions are required to perform due diligence and report suspicious transactions. The plaintiffs argue that Binance didn’t just fail to meet these obligations — it structured its business in ways (omnibus wallets, weak checks) that made tracing illicit activity difficult. (FastBull)
Binance’s Defense and Counterarguments
In its defense, Binance argues:
- No “special relationship” with terrorists — The company insists it did not have a targeted partnership with Hamas or any specific group. (coinglass)
- Compliance with sanctions laws — Binance claims it follows the same rules as other regulated financial institutions. (The Block)
- Insufficient legal basis for plaintiffs — Binance wants the court to dismiss the case, saying the plaintiffs haven’t established the necessary legal elements. (Cointelegraph)
Still, the plaintiffs counter that Binance not only failed at basic controls but took active steps to make monitoring and enforcement harder — for example, by moving funds internally when accounts were flagged. (Yahoo)
Potential Consequences if the Plaintiffs Succeed
If the lawsuit prevails, several outcomes could follow:
- Major financial liability: Binance could be forced to pay large damages to the plaintiffs.
- Reputational damage: A ruling against Binance might significantly erode user trust, especially among institutions.
- Stronger regulation: A decision could trigger tighter regulatory scrutiny and possibly stricter AML requirements for crypto exchanges.
Crucially, it could reshape how the crypto industry views its duty of care when it comes to high-risk customers and illicit fund flows.
Counterpoints and Broader Industry Implications
While the allegations are serious, there are some counterpoints worth considering:
- Some industry observers argue that crypto is not the main financial channel for Hamas and other terror groups.
- Binance cites regulators’ statements: heads of U.S. agencies like FinCEN and OFAC have maintained that “cryptocurrency is not widely used by Hamas terrorists.” (coinglass)
- Even if the lawsuit succeeds, it could spark regulatory overreach: if every exchange is held liable for all illicit flows, compliance demands may balloon, potentially making compliance cost-prohibitive.
This case, therefore, is not just about Binance — it could set a precedent for all crypto platforms.
Broader Take on Accountability and Crypto
At its core, this lawsuit brings to light a deeper tension in the crypto world. On one hand, blockchains are transparent: transactions are traceable, pseudonymous, and auditable. On the other, good actors may exploit that very transparency if platforms don’t enforce strong checks.
If exchanges like Binance are allowed to operate with weak oversight, they risk being co-opted as clandestine payment networks. That can have grave implications for global security. Conversely, if regulation becomes too burdensome, it could stifle innovation and push users toward unregulated or decentralized platforms that may be even harder to monitor.
In short, there’s a delicate balance: ensuring accountability without stifling the freedoms that make crypto powerful in the first place.
What This Means for Users and the Industry
For regular users, this case underscores the importance of:
- Choosing exchanges that prioritize robust compliance programs
- Being aware that crypto platforms are not just tech companies but also financial institutions with legal obligations
- Understanding that regulatory risk in crypto is real and evolving
For the crypto industry, Binance’s challenge may serve as a wake-up call. Exchanges might need to invest more heavily in compliance infrastructure, better identify risky customers, and adopt stricter internal controls — or face the legal and reputational consequences.
Closing
This lawsuit against Binance is more than a headline. It raises profound questions about responsibility, technology, and the intersection of finance and security. If the plaintiffs’ allegations are correct, it could mean Binance played a role in enabling terror financing. If Binance’s defense holds, it may argue that the fault lies not with the company but with broader systemic issues in tracking illicit financial flows.
Whichever way the court rules, the outcome is likely to reverberate far beyond Binance — potentially reshaping how regulations, compliance, and trust are woven into the future of crypto.
Sources:
- The Block: Binance ‘knowingly facilitated’ illicit transactions. (The Block)
- Japan Times: Lawsuit by Hamas victims under anti-terrorism law. (The Japan Times)
- Yahoo News: New lawsuit accusing Binance of enabling terror attacks. (Yahoo)
- NDTV: Details on the plaintiffs and claims. (www.ndtv.com)
- Finance Magnates: Analysis of the lawsuit’s legal basis. (Finance Magnates)
- SeidenLaw / Court Document: Plaintiffs’ duty and internal control failure. (seidenlaw.com)
- Bloomberg: Prior use of Binance by terror groups (settlement history). (Bloomberg)
