In a significant legal development, a U.S. court has dismissed a lawsuit alleging that Binance, the world’s largest cryptocurrency exchange, facilitated terrorist financing. Following the ruling, the exchange’s former CEO, Changpeng “CZ” Zhao, forcefully defended the business model of centralized crypto exchanges (CEXs), asserting they have “zero motive” to engage with terrorist actors.
Court Dismisses Terrorist Financing Lawsuit Against Binance
The lawsuit, filed in the U.S. District Court for the Southern District of New York, was brought by hundreds of victims and family members of victims from dozens of terrorist attacks. The plaintiffs, representing 535 individuals linked to 64 attacks between 2016 and 2024, accused Binance, its former CEO, and its U.S. affiliate of helping groups like Hezbollah, Hamas, ISIS, al-Qaeda, and Palestinian Islamic Jihad move funds via cryptocurrency. They sought damages under the U.S. Anti-Terrorism Act and the Justice Against Sponsors of Terrorism Act (JASTA), which permits civil suits against entities alleged to aid terrorism.
Judge Jeannette A. Vargas dismissed the case at the pleading stage, determining the complaint failed to plausibly connect Binance’s specific operations to the individual attacks that caused the plaintiffs’ injuries. While the filing described general compliance failures and illicit activity on the platform, the court found it did not establish a sufficient causal link between the exchange’s conduct and the terrorist acts. The judge granted the plaintiffs 60 days to file an amended complaint.
Economic Incentives Make Terrorist Links Illogical, Says CZ
Reacting to the dismissal on the social media platform X, Zhao argued that the fundamental economics of a trading exchange render any collaboration with terrorists nonsensical. “There are absolutely zero (0) motive for any CEX to have anything to do with terrorists,” Zhao wrote. He explained that such actors are unlikely to generate meaningful trading volume or revenue for the exchange and would typically deposit funds only briefly before withdrawing them, providing no economic benefit while introducing extreme legal and reputational risk.
This perspective aligns with industry arguments that regulated exchanges implement stringent Know-Your-Customer (KYC) and Anti-Money Laundering (AML) procedures precisely to avoid the severe penalties associated with enabling illicit finance. The court’s decision, focused on the plaintiffs’ failure to prove specific causation, does not constitute a ruling on Binance’s overall compliance but underscores the high legal bar for such claims.
Binance Rejects Allegations of Processing Sanctioned Iranian Transactions
Separately, Binance is contesting fresh allegations from U.S. lawmakers regarding its transaction monitoring. A group of 11 U.S. senators had raised concerns based on media reports claiming Binance processed over $1 billion in transactions linked to Iranian entities Hexa Whale and Blessed Trust, and that it terminated employees who raised internal concerns.
In a formal letter to Senators Richard Blumenthal and Ron Johnson, Binance rejected these claims, stating the senators’ February inquiry relied on reports that were “demonstrably false” and lacked credible evidence. The exchange did not provide specific counter-data in the public letter but characterized the allegations as part of a broader pattern of misinformation. This exchange highlights the ongoing regulatory scrutiny Binance faces across multiple jurisdictions concerning its historical controls and current operations involving sanctioned regions.
Source: CZ
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