Binance Sued Over Alleged Hamas Crypto Funding

The lawsuit, filed in federal court in North Dakota, alleges that Binance’s design features created an environment where identifying individual users or tracing specific transfers became exceptionally difficult. According to the complaint, the exchange relied on pooled wallets that commingled assets, maintained limited record-keeping practices, and implemented weak customer verification systems from 2017 through at least 2023. These structural choices, the plaintiffs argue, allowed users tied to Hamas to move funds through the centralized crypto exchange without adequate detection or oversight.

The legal filing specifically points to Binance’s use of omnibus wallets and short-term record-keeping as key factors that made it challenging to determine who was transacting on the platform. “Binance not only knowingly provided financial services to Hamas; it actively tried to shield its Hamas customers and their funds from scrutiny by U.S. regulators or law enforcement—a practice that continues to this day,” states the lawsuit provided to Decrypt by the plaintiffs’ legal counsel at Willkie Farr & Gallagher LLP. The complaint represents one of several civil actions accusing Binance of facilitating transactions connected to groups the U.S. designates as terrorist organizations, including similar cases in the Southern District Court of New York.

The lawsuit places significant responsibility on Binance co-founder Changpeng Zhao, alleging that he directed practices specifically designed to obscure customer locations and activity. According to the complaint, Zhao controlled the exchange through a network of offshore entities, maintained no fixed headquarters, and instructed employees to disguise customer locations to mislead regulators. These actions, the plaintiffs claim, created a system where transactions could be shielded from U.S. authorities while terrorist-linked activity flourished on the platform.

Former Ambassador Lee Wolosky, representing the victims, told Decrypt that “We believe these allegations make clear that Binance bears liability for the October 7 attacks.” Wolosky, who previously served as Director for Transnational Threats on the U.S. National Security Council under Presidents Clinton and Bush, added that Binance “must be held accountable, and it will be.” The October 7, 2023 Hamas assault resulted in over 1,200 people killed, including at least 809 civilians, with around 252 people taken hostage according to a U.N. Human Rights Council report citing Israeli authorities.

This new lawsuit emerges against the backdrop of Binance’s already substantial legal challenges. In 2023, the company agreed to a $4.3 billion settlement with U.S. authorities over anti-money laundering and sanctions violations. As part of that deal, Zhao pleaded guilty to failing to maintain an effective AML program and stepped down as CEO. He served a short federal sentence before receiving a presidential pardon from President Donald Trump last month, a development that adds complexity to the current legal landscape.

The plaintiffs’ legal team argues that the fundamental structure of cryptocurrency exchanges like Binance creates inherent risks. “No matter how much an exchange KYCs someone, [there is] ultimately no link between that identity and the counterparty’s sending or receiving addresses on any chain,” Wolosky explained, noting that the scheme is “incredibly common” and that “the tech to stop it doesn’t exist, so it’s rampant.” This perspective highlights the broader regulatory challenges facing the cryptocurrency industry and raises questions about whether existing anti-money laundering frameworks can effectively combat terrorist financing through digital assets.

With this lawsuit joining other similar cases against Binance, the legal pressure on the cryptocurrency exchange continues to mount. The outcome of these proceedings could have significant implications not only for Binance but for the entire cryptocurrency industry, potentially forcing fundamental changes in how exchanges implement customer verification, transaction monitoring, and regulatory compliance measures to prevent terrorist financing through digital assets.