A lawsuit accusing cryptocurrency exchange Binance of aiding and abetting the financing of terrorism has disappeared after a US federal court dismissed it.
Not supporters of terrorism
Troell et al. v. The Binance case, in an opinion and order issued on March 6 by Judge Jeannette A. Vargas, issued by the US District Court for the Southern District of New York, was dismissed. The defendants’ motion was granted against the complaint of 535 plaintiffs, all of whom were victims or family members of victims of terrorist attacks.
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Charge
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 between 2016 and 2024. They claimed that Binance, Zhao and all BAM Trading allowed Habolla. ISIS, al-Qaeda, Palestinian Islamic Jihad (PIJ) and Iranian proxies for transferring funds that amount to aiding and abetting terrorism under the US Anti-Terrorism Act and the Justice Against Sponsors of Terrorism Act (JASTA).
Why did the crypto-terror funding case fall apart?
The court granted the Rule 12(b)(6) motions to dismiss, finding that the complaint failed to plausibly allege that Binance “willfully and substantially assisted” the specific attacks at issue.
Two major criticisms of the judge
Judge Jeannette Vargas’ opinion was based on two fundamental weaknesses in the plaintiffs’ theory. First, although the complaint relied heavily on blockchain traces, sanctions list designations, and reports of terrorist groups using Binance, it did not credibly show that Binance, Zhao, or BAM Trading knew at the time that specific wallets on the platform were controlled by the FTO (Foreign Terrorist Organization) or their close associates.
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Second, the court found that the plaintiffs failed to connect the alleged cryptographic flows on Binance to their 64 terrorist attacks. The complaint described millions of dollars in transactions involving “FTO-related” or Iran-related wallets and described a vast ecosystem built to finance the operations, but did not specify who owned the wallets in question, when specific transfers took place, or what role those transfers played in operational planning. It also did not specify how the transactions processed by Binance materially contributed to the specific explosions, missile attacks, shootings, hostage-taking or Wizard Spider ransom incident that harmed the 535 plaintiffs.
The law behind the reasoning
Under the US Anti-Terrorism Act and JASTA (Justice Against Sponsors of Terrorism), it is not enough to show that designated terrorist organizations or sanctioned Iranian activists have accessed the platform at some point. Victims must credibly allege that the defendant knew who he was dealing with and that his conduct was closely related to the attacks in question, not just “general” terrorism.
In this case, the judge believes that the general allegations about “terrorist-related wallets” in Binance and the references to weak KYC (Know Your Customer), VPN loopholes and evasion of US users, do not specifically show that Binance services increase the transactions that the plaintiffs suffer.
Claimants still have 60 days to file a refund, so really, Binance isn’t completely out of the woods yet. Additionally, Binance remains under intense scrutiny: the exchange is still navigating a $4.3 billion AML and sanctions transaction, a court-appointed monitor, and political pressure in Washington over potential terrorist financing disclosures, as detailed by Bitcoinist and NewsBTC.
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