A lawsuit accusing cryptocurrency exchange Binance of enabling the financing of terrorism by facilitating it collapsed after it was rejected by a US federal court.
Not supporters of terrorism
Troell et al. v. Binance case dismissed in the opinion and decision issued on March 6 by Judge Jeannette A. Vargas of the United States District Court for the Southern District of New York. The defendants’ motions were granted in response to a complaint filed by 535 plaintiffs, all of whom were victims or family members of victims of the terrorist attacks.
Indictment
The plaintiffs accused Binance, Changpeng “CZ” Zhao (its founder and former CEO) and BAM Trading Services (the company behind the Binance.US exchange) of facilitating 64 terrorist attacks carried out between 2016 and 2024. They alleged that Binance, Zhao, and BAM Trading allowed wallets allegedly linked to Hamas, Hezbollah, ISIS, Al-Qaeda, Palestinian Islamic Jihad (PIJ), and Iran to be used to transfer funds, which amounts to aiding and abetting terrorism under the U.S. Anti-Terrorism Act and the Justice Against Sponsors of Terrorism Act (JASTA).
Why the crypto terrorism financing case collapsed
The court granted Rule 12(b)(6) motions to dismiss the complaint, finding that the complaint did not make a compelling allegation that Binance “knowingly provided substantial assistance” in connection with the specific attacks at issue.
Two huge criticisms from the judge
Judge Jeannette Vargas’s opinion rests on two fundamental weaknesses she identified in the plaintiffs’ theory. First, while the complaint relied heavily on blockchain traces, sanctions list designations, and reports from terrorist groups using Binance, it did not convincingly establish that Binance, Zhao, or BAM Trading knew at the time that specific wallets on the platform were controlled by an FTO (Foreign Terrorist Organization) or their close associates.
Second, the court ruled that the plaintiffs did not link the alleged cryptocurrency flows on Binance to the 64 terrorist attacks they cited. The complaint details multimillion-dollar transactions involving “FTO-linked” or Iran-linked wallets and describes the broad ecosystem created to finance the operations, but does not identify who owned the wallets in question, when specific transfers occurred, or what role those transfers played in operational planning. It also did not indicate how any transaction processed by Binance materially contributed to the specific bombings, missile attacks, shootings, hostage takings or the Wizard Spider ransomware incident that harmed 535 plaintiffs.
The law behind reasoning
Under the US Anti-Terrorism Act and JASTA (Justice Against Sponsors of Terrorism Act), it is not sufficient to demonstrate that designated terrorist organizations or sanctioned Iranian entities have encountered the platform at some point. Victims must convincingly argue that the accused knew who he was dealing with and that his conduct was closely related to the attacks in question and not just to terrorism “in general”.
In this case, the judge found that generalized allegations about “terrorist-linked wallets” on Binance, and references to lax KYC (Know Your Customer), VPN vulnerabilities, and evasion by US users, did not constitute concrete evidence that Binance’s services materially improved the operations the plaintiffs experienced.
Plaintiffs still have 60 days to file a lawsuit, so Binance isn’t actually completely eliminated yet. Otherwise, Binance remains under tight scrutiny: the exchange continues to grapple with a $4.3 billion anti-money laundering and sanctions settlement, court-appointed monitoring, and political pressure in Washington over alleged terrorism financing disclosures, as Bitcoinist and NewsBTC detail.
BTC's price trends to the downside on the daily chart. Source: BTCUSD on Tradingview
Cover image from ChatGPT, BTCUSD chart from Tradingview
