A lawsuit against Binance tests the extent to which crypto platforms can be held liable for harm in the real world. Filed by families of victims of the October 2023 attacks in Israel, it comes amid ongoing reactions to founder Changpeng Zhao (CZ)'s recent presidential pardon.
More than a new legal headache, the lawsuit is seen as a possible blueprint for a shift from regulatory fines to high private liability tied to terrorism financing.
Terror financing allegations hit Binance
The case, filed by more than 70 families in a U.S. federal court last week, accuses Binance of intentionally facilitating transactions for Hamas, Hezbollah, Iran's Islamic Revolutionary Guard Corps, and other U.S.-designated terrorist groups.
The plaintiffs, primarily family members of those killed or injured in the October 7 attacks, allege that Binance was not simply exploited. They say the platform structurally enabled terrorism financing on a large scale.
"For years, the defendants have knowingly, willfully, and systematically assisted Hamas... and other terrorist groups in moving and hiding the equivalent of hundreds of millions of U.S. dollars through the Binance platform to support their terrorist activities. This assistance directly and materially contributed to the October 7 attacks and subsequent terrorist attacks," the complaint states.
Previous government investigations focused on Binance's shortcomings in combating money laundering. However, this lawsuit reframes the narrative, asserting that CZ's leadership of the platform has systematically contributed to real-world violence.
The lawsuit also comes at a crucial time for the company.
Last month, U.S. President Donald Trump granted founder CZ a pardon after Binance participated in a billion-dollar deal linked to a crypto venture connected to the Trump family.
This move wiped CZ's criminal record clean and could allow him to take on a more direct role within the company.
The case also comes to light two years after Binance's settlement in 2023 with U.S. authorities, which included a $4.3 billion fine. The company admitted to violating the Bank Secrecy Act and U.S. sanctions laws. CZ pleaded guilty, stepped down as CEO, and served a four-month prison sentence.
Although CZ's pardon suggested that Binance got off scot-free, the lawsuit demonstrates that neither he nor the company is immune from civil liability.
Despite limitations on prosecution, civil claims are increasing
The families' lawsuit builds on facts already established by U.S. criminal enforcement, giving the plaintiffs a strong legal basis.
Because Binance has already admitted to extensive violations of the Bank Secrecy Act and U.S. sanctions laws, the burden of proof is significantly lower. The families claim that Binance has embedded these shortcomings into its core operations, not in isolated compliance issues.
Instead of relying on broad allegations, the complaint reportedly cites specific wallets, money laundering intermediaries, and transaction patterns linked to designated terrorist groups.
In its structure, the case resembles the way federal prosecutors formulate complex criminal charges. The difference is that this same evidentiary framework is now being employed by private plaintiffs under U.S. anti-terrorism laws.
These laws allow victims of terrorism to seek civil damages from entities accused of providing material support, even indirectly. This legal pathway transforms Binance's prior regulatory violations into the basis for a potentially significant civil liability case.
For years, cryptocurrency enforcement followed a cycle: regulators investigated, companies paid fines, executives stepped down, and markets moved on. Civil lawsuits directly tied to terrorism financing break that rhythm.
Unlike regulatory settlements, which limit financial exposure and close legal chapters, terrorism-related civil cases can bring multiplied damages and years of ongoing risk.
A new enforcement class?
For the crypto industry, the implications reach far beyond one exchange or one courtroom. If the case survives an early dismissal and proceeds to trial, it could lead to new scrutiny on how centralized platforms monitor, flag, and freeze risky activities.
More importantly, a victory for the families could establish that private personnel—not just regulators—now poses one of the most serious financial threats to crypto companies.
In that scenario, compliance shortcomings would no longer only result in fines. They would become long-term liabilities that would haunt platforms for years.
