The world's largest cryptocurrency exchange, Binance, and its founder Changpeng "CZ" Zhao, face a major federal lawsuit alleging they knowingly helped send hundreds of millions of dollars to US-designated terrorist organizations, including Hamas . The case, brought by families of victims of the October 7, 2023 attacks in Israel, alleges Binance structured itself as a refuge for illicit activity and could fundamentally alter how crypto exchanges are held accountable under the law .
Legal Reckoning: A new lawsuit accuses Binance of facilitating terror financing, testing the boundaries of liability for centralized crypto platforms.
Visual representation of the legal and compliance challenges facing major cryptocurrency exchanges
⚖️ The Lawsuit's Core Allegations
Source: Federal Court Complaint, U.S. District Court for North Dakota
A "Criminal Enterprise": Lawsuit Alleges Deliberate Design for Illicit Finance
The lawsuit, filed in U.S. District Court in North Dakota, presents a damning portrait of Binance's operations. It alleges that Zhao and close associate Guangying "Heina" Chen intentionally designed Binance "as a criminal enterprise to facilitate money laundering on a global scale" ]. The plaintiffs claim the exchange knew for years that terrorist groups like Hamas, Hezbollah, and Iran's Islamic Revolutionary Guard Corps (IRGC) were transacting on its platform and "nevertheless actively assisted their use" .
"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."
— Excerpt from the Civil Complaint
A central allegation is that Binance maintained a policy of only screening funds for suspicious activity when customers tried to withdraw money, not when they deposited it. This created a window where illicit actors could freely move assets on the platform . The lawsuit further claims Binance failed to file legally required Suspicious Activity Reports (SARs) and even manipulated transaction reporting "to avoid attracting scrutiny" from U.S. regulators .
The Political Backdrop: A Pardon and Shifting Regulatory Winds
The lawsuit arrives in a complex political and regulatory landscape. It was filed just weeks after President Donald Trump pardoned Binance founder Changpeng Zhao in October 2025. Zhao had pleaded guilty in late 2023 to charges of failing to maintain an effective anti-money laundering program and served a four-month prison sentence. The White House stated Zhao was a casualty of the prior administration's "war on cryptocurrency," though Trump later claimed he had "no idea" who Zhao was.
This pardon followed a significant shift in U.S. crypto enforcement. In May 2025, the Securities and Exchange Commission (SEC) dropped its major lawsuit against Binance and Zhao, which had accused the exchange of operating unregistered exchanges, broker-dealers, and clearing agencies. The dismissal, granted "with prejudice," signaled a move away from aggressive enforcement under the prior SEC leadership and toward a posture of regulatory engagement.
Previous Regulatory Action (2023)
DOJ Settlement: Binance pleaded guilty, paid over $4.3 billion, and CZ stepped down as CEO.
SEC Lawsuit (Dismissed 2025): Charged Binance with 13 counts including operating unregistered exchanges and commingling funds.
Focus: Regulatory compliance, securities laws, and corporate structure.
Current Civil Lawsuit (2025)
Plaintiffs: Victims of terrorism and their families.
Allegations: Knowingly facilitating $1bn+ in terror financing, including funds for Hamas.
Focus: Direct liability for enabling violent acts and violating anti-terrorism statutes.
This regulatory shift is part of a broader effort by the Trump administration to position itself as an ally to the crypto industry. The Justice Department has shut down its dedicated crypto enforcement team, and the CFTC is now led by a venture capitalist with crypto ties ]. Binance itself is taking a $2 billion investment from the Emirati state fund MGX, facilitated by a stablecoin launched by the Trump family's World Liberty Financial project.
Redefining Crypto Liability: From Neutral Platform to Accountable Intermediary
Legal experts suggest this lawsuit represents a potential turning point for the entire digital asset industry. The plaintiffs are invoking statutes like the Anti-Terrorism Act and the Justice Against Sponsors of Terrorism Act, laws typically applied to banks and state actors . If the court accepts that a cryptocurrency exchange can "knowingly" support illicit activity through insufficient controls, the legal shield of being a "neutral platform" could dissolve.
The Liability Shift: The lawsuit argues that crypto exchanges should be treated as liable financial intermediaries, not neutral tech platforms, when they fail to implement basic controls.
Conceptual diagram illustrating the changing legal perception of cryptocurrency exchange responsibility
"If the court accepts this framing, the role of an exchange will fundamentally change. It will no longer be viewed as a neutral platform. It will be treated as a liable financial intermediary," notes analysis of the case. This opens the door for aggrieved citizens worldwide to pursue civil claims directly, where a defense of ignorance may no longer be sufficient.
The case also highlights an industry-wide architectural critique. The lawsuit's narrative points to the inherent risks of permissionless systems where anonymity can outpace accountability, arguing for a new infrastructure category with built-in identity checks and automated compliance at the protocol level.
Broader Legal Onslaught: Beyond Terror Finance Allegations
While the terror finance case is the most prominent, Binance faces other significant legal challenges that compound its risk profile. These include:
- A Florida Appeals Court Ruling: A state appeals court revived an $80 million lawsuit related to alleged stolen Bitcoin, finding that Binance has sufficient connections to the U.S. for the case to proceed in Miami-Dade County. This reinforces that international exchanges are not immune to U.S. jurisdiction.
- Enforceable Arbitration Clauses: In a separate case, Binance.US successfully compelled a user lawsuit into private arbitration based on its Terms of Use, a tactic that may limit public class actions but does not apply to the terror finance suit brought by non-customers.
- Systemic Operational Risks: A separate incident in October 2025, where an architectural flaw in Binance's "Unified Account" system contributed to $19 billion in market losses, underscores the operational and systemic risks inherent in centralized exchange models.
In a statement regarding the terror finance lawsuit, Binance declined to comment on the litigation specifically but said it complies "fully with internationally recognised sanctions laws" and has executed "a wide-ranging transformation" of its compliance framework.
The outcome of this lawsuit could set a powerful precedent. It tests whether U.S. anti-terrorism laws can be successfully applied to global cryptocurrency exchanges and whether victims of overseas attacks can seek redress from the digital platforms that allegedly facilitated them. For the crypto industry, it signals that accountability may increasingly come from courtrooms, not just regulatory agencies.
About the Author: Alexandra Vance
Alexandra Vance specializes in the intersection of politics, regulation, and cryptocurrency markets. With a background in political science and financial journalism, she analyzes how government policies and geopolitical events impact digital asset valuations and market structures.
Disclaimer: This content is for informational and educational purposes only and should not be considered financial, investment, or legal advice. The allegations described are from a civil complaint and have not been proven in court. Always conduct your own research and consult with professionals before making any decisions.
Sources & Data References
- Federal Lawsuit: Families of Oct. 7 Victims v. Binance Holdings Ltd., et al., U.S. District Court for the District of North Dakota. (View PDF on CourtListener). Coverage and key allegations from Bloomberg, BBC News, and Law360.
- U.S. Securities and Exchange Commission (SEC) vs. Binance (2023-101). Initial charges: SEC Press Release. Dismissal (2025): CNBC Report.
- U.S. Department of Justice (DOJ) Settlement: Announcement of Binance's guilty plea and $4.3 billion settlement (November 2023). (DOJ Press Release). Associated Treasury Department findings.
- Political Context: Reporting on the pardon of Changpeng Zhao by President Trump (October 2025). (BBC News Report).
- Industry Impact Analysis: Commentary and analysis on the lawsuit's potential to redefine crypto exchange liability and infrastructure, referencing reports from crypto and legal publications.
Note: Court documents are hosted on public access portals. News articles may be subject to paywalls.