Binance Faces New Lawsuit Over Alleged Hamas Transactions
On Monday, Binance and its co-founder, Changpeng Zhao, were subjected to a new lawsuit that alleges the cryptocurrency exchange facilitated transactions connected to Hamas over a span of six years. This legal action, lodged in a North Dakota federal court, is part of a growing trend of civil cases against Binance, suggesting it has enabled funding that supports groups classified as terrorist organizations by the United States. Previous lawsuits include others filed in New York, including Raanan et al. v. Binance Holdings Limited.
Details of the Lawsuit
The legal complaint brings together more than 300 families of Americans impacted by attacks linked to Hamas. According to the lawsuit, Binance’s organizational framework and lax regulatory practices allegedly permitted users associated with terrorist entities to transfer funds using its centralized exchange. The plaintiffs assert that from 2017 to 2023, Binance implemented insufficient controls, allowing for inadequate customer verification and the use of omnibus wallets, which mixed various assets, complicating the tracking of transactions.
“Binance not only knowingly rendered financial services to Hamas; it actively endeavored to obscure its customers and their transactions from the oversight of U.S. authorities and law enforcement, a practice purportedly ongoing,” states a segment of the lawsuit presented to Decrypt by the plaintiffs’ attorneys from Willkie Farr & Gallagher LLP.
The document highlights Binance’s reliance on pooled wallets, minimal record-keeping, and insufficient identity verification processes, making it difficult to identify who was conducting transactions on the platform.
Statements from Legal Representatives
Lee Wolosky, an attorney representing the victims and a former U.S. Ambassador who has held significant roles in national security, expressed that these allegations indicate Binance’s role in the violence of the attacks that occurred on October 7. He emphasizes the necessity of holding Binance accountable due to their alleged failures in compliance.
The attacks by Hamas, which claimed the lives of over 1,200 individuals—among them at least 809 civilians—and took around 252 hostages, were reported by a U.N. Human Rights Council document referencing Israeli data.
Operational Concerns and Regulatory Issues
The legal complaint outlines how Binance operated a network of offshore entities seemingly controlled by Zhao, lacking a formal headquarters and depending on pooled custody and transient record-keeping practices. Such design choices purportedly made it arduous to detect individual users or trace particular transfers, all during a period when the platform’s activities surged.
Moreover, the filing claims Zhao directed the obfuscation of certain transactions from U.S. regulatory scrutiny and instructed employees to misrepresent customer locations. Binance’s legal issues escalated significantly in 2023, culminating in a $4.3 billion settlement with U.S. regulatory bodies regarding allegations of anti-money laundering and sanctions violations. Zhao resigned as CEO and admitted to not maintaining an effective anti-money laundering program, subsequently serving a brief prison term before being pardoned by former President Trump last month.
Challenges in Cryptocurrency Tracking
Wolosky warned of the challenges in linking identities to specific transaction addresses on cryptocurrency networks. He observed that while exchanges attempt to verify customer identities, the inherent design of blockchain technology poses substantial barriers to fully tracking counterparty transactions, a situation he described as common in the industry, with necessary preventative technologies still nonexistent.
Bloomberg was the first outlet to report on the recent lawsuit against Binance, and Decrypt has reached out to the exchange for a response.
