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Binance and its co-founder Changpeng Zhao are facing a fresh legal challenge after more than 300 families of American victims filed a lawsuit claiming the exchange enabled crypto transactions tied to Hamas. The lawsuit, submitted in federal court in North Dakota, alleges that Binance operated a system from 2017 to 2023 that allowed users connected to U.S.-designated terrorist groups to move funds through the platform undetected.
According to the filing, Binance’s corporate structure, verification procedures, and custody setup created an environment where illicit transfers could occur without oversight. The plaintiffs argue that these weaknesses contributed to attacks attributed to Hamas, making Binance partly responsible for enabling the movement of funds that may have supported terrorism-related activity.
Claims of Weak Controls and Commingled Wallets
The lawsuit outlines several design and operational choices that allegedly made Binance vulnerable to abuse. At the center of the complaint is the claim that Binance relied heavily on pooled or omnibus wallets, which combine customer funds and make it difficult to trace individual transactions. The filing also points to limited record-keeping and weak identity verification checks as factors that allowed suspicious activity to go unnoticed.
The complaint states that from 2017 through at least 2023, Binance’s controls failed to meet the standards expected of a large exchange handling global funds. Plaintiffs argue that the system structure hindered regulators and law enforcement from identifying wallet owners or monitoring activity across the platform.
In a statement shared with Decrypt, the plaintiffs’ legal team at Willkie Farr & Gallagher LLP claimed that Binance “knowingly provided financial services” to Hamas-linked users and “actively tried to shield” those users from U.S. oversight. Former Ambassador Lee Wolosky, who is representing the victims, said the allegations show “Binance bears liability for the October 7 attacks” and must be legally accountable.
A Pattern of Similar Legal Battles
This lawsuit is not the first time Binance has been accused of allowing transfers connected to sanctioned groups. Other ongoing cases—such as Raanan et al. v. Binance Holdings Limited in New York and Rosenberg et al. v. Binance Holdings Ltd.—make similar arguments about how the exchange’s systems may have facilitated transactions involving organizations labeled as terrorist groups by U.S. authorities.
The latest complaint emphasizes that Binance’s structure, lack of a fixed headquarters, and reliance on offshore entities allowed it to avoid strict regulatory oversight. The plaintiffs claim that decisions made by Zhao, including instructing employees to disguise customer locations, contributed to shielding high-risk users from detection.
Context: The October 7 Attack
The filing references the October 7, 2023 Hamas attack, which resulted in more than 1,200 deaths and over 250 hostages, according to data cited from Israeli authorities via a U.N. Human Rights Council report. The plaintiffs argue that any platform enabling transactions linked to Hamas should be held liable for contributing to broader risks.
While the lawsuit does not claim that Binance directly supported Hamas, it alleges that weaknesses in the exchange’s systems created opportunities for illicit actors to exploit the platform.
Binance’s Past Regulatory Troubles
Binance has faced significant regulatory pressure over the past several years. In 2023, the company agreed to a $4.3 billion settlement with U.S. authorities after investigations into sanctions breaches and anti-money-laundering failures. As part of that settlement, Zhao pleaded guilty to failing to implement an effective AML program and stepped down as CEO.
He served a brief federal sentence before being granted a presidential pardon by U.S. President Donald Trump, who has taken a more crypto-friendly stance.
Industry Experts Highlight Broader Challenges
Some analysts note that even with strong identity checks, linking real-world identities to blockchain activity remains complicated. Mehow Pospieszalski, founder of crypto wallet platform AmericanFortress, told Decrypt that there is “ultimately no link” between KYC records and the identities behind blockchain sending and receiving addresses. He added that such gaps are “common” and that current technology cannot fully eliminate this issue.
This perspective suggests that the challenges Binance faces may not be unique, but the plaintiffs argue that the exchange’s size, design choices, and alleged internal practices amplified the risks.
A Case That Could Shape Future Compliance Standards
The lawsuit adds to the ongoing scrutiny surrounding Binance’s global operations and may influence future regulatory expectations for major crypto exchanges. With the industry seeking clearer compliance guidelines, legal actions like this could play a role in defining the responsibilities of centralized platforms when it comes to preventing illicit activity.
Whether the case proceeds or results in an out-of-court settlement, it represents another major moment in the broader debate over how crypto platforms should be regulated and what obligations they hold when transactions involve high-risk entities.
