Why US Court Says Binance Is Not (Yet) Responsible for Crypto-Terrorist Streams
A lawsuit accusing crypto exchange Binance of facilitating the financing of terrorism has fallen apart after a US Federal court dismissed it.
Not Supporters of Terrorism
Troell et al. v. Binance’s lawsuit was dismissed in an opinion and order issued on March 6 by Judge Jeannette A. Vargas of the US District Court for the Southern District of New York. The defendants’ motions were granted against a complaint brought by 535 plaintiffs, all of whom were victims or family members of victims of terrorist attacks.
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The case
The plaintiffs accuse Binance, Changpeng “CZ” Zhao (founder and former CEO) and BAM Trading Services (the company behind the Binance.US exchange) of facilitating 64 terrorist attacks that occurred between 2016 and 2024. They say Binance, Zhao and BAM Trading allow wallets that are allegedly tied to, ISIS, Hamas, Hamas, Hamas, Hamas. Islamic Jihad (PIJ) and Iranian proxies to transfer funds, which amounts to aiding and abetting terrorism under the US Anti-Terrorism Act and the Justice Against Sponsors of Terrorism Act (JASTA).
Why the Crypto-Terror Financing Case Fall Apart
The court granted the motions to dismiss under Rule 12(b)(6), finding that the complaint failed to allege that Binance “provided substantial assistance” in the specific attack at issue.
Two Major Criticisms of the Judge
Judge Jeannette Vargas’ opinion is based on two fundamental weaknesses she identified in the plaintiffs’ argument. First, although the complaint relied heavily on blockchain tracking, in the list of fines and reports of terrorist groups using Binance, it did not clearly show that Binance, Zhao or BAM Trading knew at the time that certain wallets on the platform were controlled by the FTO (Foreign Terrorist Organization) or their close associates.
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Second, the court said the plaintiffs failed to connect the alleged flow of crypto to Binance to the 64 terrorist attacks they claim. The complaint mapped millions of dollars in activities involving “FTO-associated” or Iran-linked funds and described the extensive ecosystem built to support the activities, but did not identify who owned the funds in question, when certain transfers occurred, or what role those transfers played in organizing the operation. It also did not identify how any of Binance’s processed actions developed specific bombings, rocket attacks, shootings, kidnappings, or the Wizard Spider ransomware incident that harmed 535 plaintiffs.
The Law Behind Reasoning
Under the US Anti-Terrorism Act and JASTA (The Justice Against Sponsors of Terrorism Act), it is not enough to show that designated terrorist organizations or authorized Iranian actors have touched the platform at some point. Victims must clearly state that the defendant knew who he was dealing with and that his behavior was closely related to the attack in question, not just “general” terrorism.
In this case, the judge said that the frequent allegations about “terrorist wallets” in Binance, as well as indications of lax KYC (Know Your Customer), VPN loopholes, and evasion of US users, were not concrete to show that Binance’s services have improved significantly in the operations faced by the plaintiffs.
The plaintiffs still have 60 days to file, so, of course, Binance isn’t completely out of the woods yet. Besides, Binance is still under intense scrutiny: the exchange is still reeling from a $4.3 billion AML and sanctions agreement, a court-appointed watchdog, and political pressure in Washington regarding exposure to terrorist financing, as explained by Bitcoinist and NewsBTC.
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