Why the Latest Binance Lawsuit Is More Dangerous Than Any Regulator

A lawsuit against Binance is testing the extent to which crypto platforms can be held liable for real-world harm. Filed by families of victims of the October 2023 attacks against Israel, it arrives amid continued backlash over the recent presidential pardon of founder Changpeng Zhao (CZ).

More than a new legal headache, the lawsuit is being watched as a potential blueprint for a shift from regulatory fines to high-stakes private liability tied to terrorism financing.

Terror Financing Claims Hit Binance

The case, brought by more than 70 families in a US federal court last week, accuses Binance of knowingly enabling transactions for Hamas, Hezbollah, Iran’s Islamic Revolutionary Guard Corps, and other US-designated terrorist groups.

The plaintiffs, mostly relatives of those killed or injured in the October 7 attacks, argue Binance was not merely exploited. They say the platform structurally enabled terrorist financing at scale.

“For years, Defendants knowingly, willfully, and systematically assisted Hamas… and other terrorist groups to transfer and conceal the equivalent of hundreds of millions of US dollars through the Binance platform in support of their terrorist activities. This assistance directly and materially contributed to the October 7 Attacks and to subsequent terrorist attacks,” read the complaint.

Earlier government investigations have focused on Binance’s anti-money laundering failures. However, this lawsuit reframes the narrative, arguing that CZ’s stewardship of the platform has systemically contributed to real-world violence. 

The lawsuit also arrives at a consequential moment for the company.

Last month, US President Donald Trump granted Binance founder CZ a pardon after Binance participated in a multibillion-dollar deal tied to a crypto venture linked to the Trump family. 

The move cleared CZ’s criminal record and could allow him to take on a more direct role at the company.

The case also arises two years after Binance’s 2023 settlement with US authorities, which included a $4.3 billion penalty. The company admitted to violating the Bank Secrecy Act and US sanctions laws. CZ pleaded guilty, stepped down as CEO, and served a four-month prison sentence.

While CZ’s pardon suggested Binance was in the clear, the lawsuit shows neither he nor the company is insulated from civil liability.

Despite Criminal Leniency, Civil Claims Intensify

The families’ lawsuit builds on facts already established by US criminal enforcement, giving the plaintiffs a strong legal foundation.

Because Binance has already admitted to sweeping violations of the Bank Secrecy Act and US sanctions laws, the burden of proof is significantly lower. The families argue Binance embedded these flaws in its core operations, not in isolated compliance failures.

Rather than leaning on broad allegations, the complaint reportedly names specific wallets, laundering intermediaries, and transaction flows tied to designated terrorist groups. 

In its structure, the case closely mirrors the way federal prosecutors assemble complex criminal indictments. The difference is that this same evidentiary framework is now being deployed by private plaintiffs under US anti-terrorism statutes.

Those laws allow victims of terrorism to pursue civil damages against entities accused of providing material support, even indirectly. This legal pathway transforms Binance’s past regulatory violations into the foundation of a potentially massive civil liability case.

For years, crypto enforcement followed a cycle: regulators investigated, companies paid fines, executives stepped aside, and markets moved on. Civil litigation tied directly to terrorism financing breaks that rhythm. 

Unlike regulatory settlements, which cap financial exposure and close legal chapters, terror-related civil cases can involve multiplied damages and years of continuing risk.

A New Enforcement Class?

For the crypto industry, the implications extend far beyond one exchange or one courtroom. If the case survives early dismissal and proceeds to discovery, it could lead to new scrutiny of how centralized platforms monitor, flag, and freeze high-risk activity. 

More significantly, a win for the families could establish that private plaintiffs—not just regulators—now pose one of the most serious financial threats to crypto businesses. 

In that scenario, compliance failures would no longer result in fines alone. They would become long-tail liabilities that follow platforms for years to come.