Binance and its founders, including prominent billionaire Changpeng Zhao, are facing a serious lawsuit in the United States, stemming from allegations that the company has facilitated the transfer of significant sums of money to organizations designated by the U.S. as terrorist groups, among them Hamas and Hezbollah. This legal action has been initiated by victims of the October 7, 2023 attacks in Israel, or their families, marking a pivotal moment that may reignite scrutiny surrounding Binance’s operational practices.
According to court documents filed in federal court in North Dakota, the lawsuit claims that Binance knowingly enabled the transfer of over $1 billion to and from accounts tied to these foreign terrorist organizations, which are implicated in the recent violence. Crucially, the lawsuit identifies at least $50 million that was transmitted shortly after the attacks occurred. The intricate details of these allegations paint a picture of a platform that may have failed to uphold its legal responsibilities and regulatory commitments.
Adding to the complexity of the situation, Binance is still reeling from a recent legal settlement in November 2023, when the firm pleaded guilty to charges related to money laundering and sanctions violations. In that case, Binance agreed to pay over $4 billion in penalties and committed to improving its compliance with anti-money laundering practices. However, the current lawsuit suggests that, despite these assurances, the company continued to operate with insufficient monitoring of incoming funds.
The complaint alleges that Binance’s approach to compliance has effectively allowed criminals to utilize the platform without significant oversight. “By deliberately failing to monitor inbound funds, Binance ensured that terrorists and other criminals could deposit and shuffle enormous sums on the exchange with impunity,” the lawsuit claims, describing the company as having structured itself as a “refuge for illicit activity.”
Despite these accusations, Binance responded by stating it has made significant improvements to its compliance systems and emphasized that “illicit flows” constitute only a minor portion of the transactions on its platform. In a public statement, a Binance spokesperson reiterated the company’s commitment to collaborating with regulatory authorities and law enforcement agencies to uphold the integrity of the global digital asset ecosystem.
The lawsuit’s timing is particularly noteworthy, coming on the heels of former President Donald Trump’s pardon of Zhao, who had previously admitted to shortcomings in Binance’s anti-money laundering framework. Following the pardon, Trump faced criticism from various quarters, including congressional Democrats concerned that his actions could create a precedent encouraging white-collar crime. These lawmakers argued that the pardon might send a message to cryptocurrency executives that they could evade consequences for illegal activities if they maintain favorable relationships with influential political figures.
As the lawsuit unfolds, the families involved are seeking financial damages through a jury trial, hoping to hold Binance accountable for its alleged role in facilitating financial transactions linked to the October 7 attacks. The outcome of this case could have significant implications not only for Binance but also for the broader cryptocurrency landscape, particularly in regard to regulatory scrutiny and operational standards across the industry.
