The lawsuit against Binance examines the limits of responsibility of crypto platforms for real damage. The lawsuit was filed by the families of victims of attacks in Israel in October 2023. The case was initiated against the backdrop of public discussion surrounding the recent presidential pardon of exchange founder Changpeng Zhao (CZ).
This process could set a precedent for transitioning from administrative fines to large-scale civil liability in the area of terrorist financing.
Allegations of supporting illegal groups
More than 70 families filed in the U.S. federal court last week. The plaintiffs accuse Binance of knowingly facilitating transactions for HAMAS, Hezbollah, the Islamic Revolutionary Guard Corps (IRGC), and other groups recognized as terrorist organizations in the U.S.
The plaintiffs are relatives of those who died or were injured in the attacks on October 7. They claim that the attackers did not just exploit vulnerabilities of the exchange. According to the plaintiffs, the platform structurally and massively facilitated the financing of terrorism.
"The defendants have consciously, deliberately, and systematically assisted HAMAS... and other terrorist groups in transferring and concealing the equivalent of hundreds of millions of U.S. dollars through the Binance platform to support their activities. This assistance directly and substantially contributed to the attacks on October 7 and subsequent terrorist acts," the complaint states.
Previously, government investigations focused on violations of anti-money laundering procedures. However, this lawsuit shifts the focus. The plaintiffs insist that the management of the platform by Changpeng Zhao systematically contributed to real-world violence.
The legal status of Changpeng Zhao and the company
The lawsuit was filed at a crucial moment for the company. Last month, U.S. President Donald Trump pardoned the founder of Binance. This happened after the exchange's involvement in a multi-billion dollar deal related to the Trump family's crypto project.
This decision cleared the criminal record of Changpeng Zhao. Theoretically, this allows him to return to direct management of the company.
The case arose two years after the settlement of U.S. authorities' claims against Binance in 2023. At that time, the agreement included a fine of $4.3 billion. The company admitted to violating the Bank Secrecy Act and sanctions legislation. Changpeng Zhao pleaded guilty, stepped down as CEO, and served a four-month prison sentence.
The pardon could create an illusion of security for Binance. However, the current lawsuit demonstrates that neither the founder nor the company is immune from civil liability.
The use of criminal facts in civil proceedings
The lawsuit is based on facts already established by U.S. law enforcement agencies. This provides the plaintiffs with a reliable legal foundation.
Binance had previously officially recognized large-scale violations of sanctions legislation and the Bank Secrecy Act. Therefore, the burden of proof for the plaintiffs is significantly reduced. Families argue that these violations were embedded in the exchange's operational activities and were not isolated compliance errors.
The complaint does not limit itself to general allegations. The document specifies particular wallets, money laundering intermediaries, and transaction flows related to banned groups.
Structurally, the case resembles complex criminal indictments from federal prosecutors. The difference lies in the instrument. The evidence base is now used by private plaintiffs under U.S. anti-terrorism legislation.
These laws allow victims to seek compensation from organizations accused of materially supporting terrorism. Even indirect assistance can be grounds for a lawsuit. Thus, past regulatory violations by Binance become the foundation for potentially enormous financial claims.
Consequences for the digital asset industry
For years, enforcement in the crypto sphere followed a certain cycle. Regulators conducted investigations, companies paid fines, executives resigned, and the market continued to operate. Civil lawsuits related to terrorist financing disrupt this rhythm.
Regulatory settlements typically limit financial losses and resolve legal issues. In contrast, civil cases related to terrorism can imply multiple increases in damages and long-term risks.
The implications extend far beyond a single trading platform. If the case passes the preliminary hearing stage and moves to evidence disclosure, it will lead to a new level of scrutiny. How centralized platforms track, label, and block high-risk activity will come under intense scrutiny.
The victory could solidify the new status of private plaintiffs. They will become one of the main financial threats to the cryptocurrency business alongside regulators. In such a scenario, compliance system failures will lead not only to fines. They will turn into long-term liabilities that pursue platforms for years.
