Binance Faces $1 Billion Lawsuit Tied to October Hamas Attacks

A significant legal challenge has emerged for cryptocurrency giant Binance, as a 284-page complaint was filed on November 24 in North Dakota federal court. This lawsuit represents the collective grievances of 306 American families who lost relatives in the October 7, 2023, Hamas attacks. The families are seeking approximately $1 billion in damages from Binance, its former CEO Changpeng Zhao, and executive Guangying “Heina” Chen. Notably, if the plaintiffs prevail, the damages could triple to $3 billion under the Anti-Terrorism Act (ATA).

Evidence Against Binance: A Complex Web

The lawsuit is anchored in a comprehensive body of evidence that includes on-chain analytics linking approximately $1 billion in flows to various terrorist organizations, such as Hamas, Palestinian Islamic Jihad, Hezbollah, and the Islamic Revolutionary Guard Corps. This evidence is coupled with Binance’s guilty plea earlier in 2023 for failing to report suspicious transactions tied to these groups.

The legal team representing the plaintiffs is led by Willkie Farr & Gallagher, a respected law firm that includes former Commodity Futures Trading Commission (CFTC) chair Christopher Giancarlo. Lead attorney Lee Wolosky, who has served as Ambassador under multiple administrations, co-heads the firm’s litigation department. This high-profile legal backing suggests a strategic approach focused on the potential for significant financial penalties against Binance under the ATA.

A Case Built on Precedent

The complaint draws on a pivotal February ruling in the Raanan v. Binance case, where a Manhattan federal judge declined to dismiss claims under the Justice Against Sponsors of Terrorism Act (JASTA). The Raanan case opened the door for deeper examinations of transaction data and Binance’s connections with Iran’s Nobitex exchange, which Elliptic has described as “critical infrastructure” for sanction evasion by the Islamic Revolutionary Guard Corps (IRGC).

A critical question raised by the lawsuit is whether centralized exchanges like Binance could be deemed indispensable infrastructure for facilitating sanctioned financial flows.

Understanding the Anti-Terrorism Act Liability

The Anti-Terrorism Act allows U.S. nationals impacted by international terrorism to seek triple damages from any entity that aided the attackers. The 2016 JASTA amendment added explicit secondary liability provisions, requiring plaintiffs to demonstrate that the defendant was generally aware of their involvement in terrorist activities and provided substantial assistance.

In a landmark 2023 Supreme Court ruling (Twitter v. Taamneh), the court indicated that simply providing generic services that terrorists could use is insufficient for liability. Plaintiffs must instead prove conscious participation in the terrorists’ actions.

Distinct Challenges for Crypto Exchanges

Unlike social media platforms, Binance faces a different legal landscape given the evidence presented in the complaint. It points to a 2023 consent order from the Financial Crimes Enforcement Network (FinCEN), outlining Binance’s failures to report transactions linked to terrorist organizations. Allegations suggest internal compliance staff at Binance explicitly noted that clients were “here for crime” and recognized problematic activities yet chose to overlook them.

The pivotal shift in the argument is moving from the stance of "we’re just a platform" to acknowledging that Binance may have knowingly created essential infrastructure for sanctioned groups.

Internal Mechanics Under Scrutiny

The complaint delves into the internal architecture of Binance, alleging that the exchange was designed to bypass anti-money laundering (AML) and Know Your Customer (KYC) protocols. For instance, it is claimed that Binance employed omnibus wallets for client crypto, obscuring the traceability of transactions on the blockchain and facilitating flows for foreign terrorist organizations.

Internal reports pointed to specific accounts linked to Hamas that went unreported, illustrating an alleged pattern of prioritizing profit over compliance with counter-terrorism obligations. The lawsuit revolves around whether Binance maintained a structure that knowingly provided substantial assistance to these groups, thereby making the consequences of the attacks foreseeable.

Broader Implications and Future Risks

While the immediate risk of a $3 billion judgment looms, the real threat lies in the long-term implications of the lawsuit. The discovery process could take years, but the precedents set by both Raanan and the ongoing Balva case could encourage more plaintiffs to follow suit.

The legal environment surrounding Binance has already led to significant operational consequences, including the suspension of dollar deposits and a decrease in trading volume. Legal liability creates ripple effects in banking relationships, with banks wary of associating with companies exposed to litigation risks.

The involvement of a well-regarded law firm like Willkie Farr amplifies concerns that severe compliance failures may prompt a shift in the entire regulatory landscape for crypto exchanges. The families behind this lawsuit may not need a victory to have lasting impacts on the liquidity and operational viability of platforms with similar compliance issues.

Conclusion

With the stakes growing higher, Binance faces a critical juncture in its operations and legal responsibilities. The current lawsuit exemplifies a backlash against platforms that fail to comply with anti-terrorism measures, setting the stage for potential shifts in both regulations and industry practices. The combination of high-profile legal representation and substantial allegations could reshape the crypto landscape as more entities grapple with the consequences of their compliance failures.