Binance Lawsuit Highlights Crypto's Accountability Gap in Terror Financing

Binance and its founder Changpeng Zhao (CZ) face a landmark lawsuit in the United States, accused of enabling over $1 billion in cryptocurrency transactions for Hamas and other designated terrorist groups. The lawsuit, filed in North Dakota federal court, represents 306 plaintiffs—including victims and families of Americans killed or injured in Hamas's October 7, 2023, attack on Israel. The plaintiffs allege that Binance's lax compliance practices, including pooled wallets, weak identity verification, and limited record-keeping, allowed illicit funds to flow to terror-linked accounts according to the report.

The complaint, spanning 284 pages, details how Binance allegedly facilitated transactions for Hamas, Hezbollah, the Palestinian Islamic Jihad, and Iran's Revolutionary Guards. It claims the exchange "deliberately" structured itself as a "safe haven for illicit activities" and that CZ directed employees to obscure user locations to evade U.S. regulators according to reports. Specific examples include accounts linked to Ali Mohammad Alawieh, son of a Hezbollah leader, and a Palestinian Islamic Jihad operative who opened a Binance account in 2020 according to data. Internal communications cited in the filing suggest Binance employees were aware of criminal activity, with one joking the platform should market itself as a money-laundering service according to internal documents.

The lawsuit builds on Binance's prior legal troubles. In 2023, the exchange settled U.S. enforcement actions over anti-money laundering (AML) violations for $4.3 billion, and CZ served four months in prison after pleading guilty to AML program failures according to reports. Despite exiting the U.S. market, Binance remains under strict oversight by the DOJ, CFTC, and FinCEN-appointed monitors, according to CZ's lawyer. The plaintiffs argue the exchange's operations have not meaningfully changed, with over $50 million in transactions processed for terror groups after the October 7 attack according to the complaint.

Binance has declined to comment on the lawsuit but maintains it complies with international sanctions laws according to the exchange. Critics, however, highlight the technical limitations of crypto platforms in tracking transactions, even with robust verification systems. Mehrow Pospieszalski, founder of AmericanFortress, noted that exchanges cannot always link verified identities to blockchain addresses according to analysis. The case raises broader questions about accountability in decentralized finance and the ability of regulators to curb illicit crypto activity.

The plaintiffs seek triple damages under U.S. anti-terrorism laws, which allow for such penalties if a company is found to have "substantially assisted" a designated terrorist group. A Manhattan judge previously ruled that victims "plausibly" alleged Binance aided the October 7 attackers, while another court denied the exchange's bid to move the case out of Alabama according to legal rulings.