The world's largest crypto exchange, Binance, has been blindsided by a $1 billion federal lawsuit alleging systematic failures to prevent terrorist financing for groups including Hamas and Hezbollah. This explosive civil case, filed by victims and families of the October 7, 2023, attack, lands just as the exchange's founder, Changpeng Zhao (CZ), received a controversial presidential pardon from President Donald Trump, intensifying global scrutiny on Binance's core compliance practices.
The Lawsuit's Core Allegations: Intentional Money Laundering
The civil lawsuit, filed in North Dakota, names Binance, CZ, and executive Gunagying “Heina” Chen. The plaintiffs allege that the exchange was an intentional vehicle for money laundering, facilitating large-scale funding for designated terrorist organizations.
- •Illicit Activity: The complaint cites numerous examples of Binance allegedly enabling funding for groups like Hamas, Hezbollah, and Palestinian Islamic Jihad. Allegations include Binance permitting transfers via off-chain networks, utilizing limited compliance checks, and allowing accounts linked to terror affiliates to operate on the platform.
- •Internal Knowledge: The suit claims that internal compliance messages demonstrate company officials were aware they were handling unlawful funds, including transactions involving gold smuggling.
- •Damages Sought: The victims' families are seeking compensatory and treble damages, arguing that the exchange enabled acts of terrorism, including murder and hostage-taking.
The Trump Pardon and Political Fallout
The timing of the lawsuit casts the recent pardon of CZ into a harsh new light:
- •Pardon Voided Criminal Penalty: President Trump voided CZ's four-month prison sentence for his 2023 guilty plea on failing to maintain an anti-money laundering (AML) program. This pardon allows Binance to potentially seek re-entry into US markets now that CZ's criminal conviction is erased.
- •Political Condemnation: Despite the pardon, the move faced immediate political backlash, with an official U.S. Senate resolution formally condemning the presidential action, arguing it challenges accountability for financial crime executives.
- •Market Impact: The civil trial will proceed despite CZ's pardon. Legal experts believe the outcome will set a critical precedent for whether crypto exchanges can be held liable for terrorist financing facilitated on their platforms, forcing the industry to fundamentally change its compliance standards.
Final Verdict: Compliance Under Global Fire
Binance is caught between a past criminal conviction (now voided by a pardon) and a new, massive civil liability stemming from terror finance allegations. While Binance insists it complies with all international sanctions—and disputes claims that crypto is widely used by terror groups—the plaintiffs' detailed allegations of compliance lapses and specific account activity pose an existential threat. The verdict of this $1 billion civil suit will define the limits of exchange liability and dramatically reshape the regulatory future of the entire crypto industry.