Binance and Changpeng Zhao Win Dismissal of $4.3B Terrorism Financing Civil Lawsuit

TLDR:

• Binance and founder Changpeng Zhao had all civil terrorism financing claims dismissed by a Manhattan federal judge.
• The 535 plaintiffs failed to prove Binance culpably linked itself to 64 terrorist attacks from 2017 to 2024.
• Judge Vargas ruled the 891-page complaint was excessive but allowed plaintiffs to file an amended version.
• Zhao accused plaintiffs of piggybacking on Binance’s 2023 guilty plea and its $4.32 billion criminal penalty.

Binance and its founder Changpeng Zhao have secured the dismissal of a major civil lawsuit. A federal judge in Manhattan ruled in their favor on Friday, March 7.

The case involved 535 plaintiffs, including victims and their relatives, tied to 64 terrorist attacks. The plaintiffs sought to hold Binance and Zhao financially liable for alleged cryptocurrency transfers to terrorist groups.

The attacks reportedly took place between 2017 and 2024 across several parts of the world.

Court Finds No Culpable Link Between Binance, Zhao, and Terrorist Organizations

U.S. District Judge Jeannette Vargas presided over the case in Manhattan’s federal court. She found that the plaintiffs did not sufficiently allege that Binance or Zhao participated in the attacks.

The judge ruled that neither defendant “culpably associated themselves with these terrorist attacks, participated in them as something they wanted to bring about, or sought by their actions to ensure their success.” Their only connection to the groups was through standard, arm’s-length transactions on the exchange.

The plaintiffs attributed the attacks to several designated foreign terrorist organizations. These included Hamas, Hezbollah, Iran’s Revolutionary Guard Corps, and Islamic State.

Palestinian Islamic Jihad, Kataib Hezbollah, and al Qaeda were also named in the complaint. Plaintiffs alleged that hundreds of millions in cryptocurrency flowed through Binance to these groups.

They also alleged billions in transactions with Iranian users were used to benefit attack proxies. Judge Vargas acknowledged Binance and Zhao may have had general awareness of financing risks.

However, she noted that their only tie to the organizations was that “they, or their affiliates, had accounts on, and have transacted on, the Binance exchange in an arms’ length relationship.” Awareness alone was not enough to establish legal liability under the law.

The judge further noted the complaint’s excessive length in her ruling. The 891-page, 3,189-paragraph filing was called “wholly unnecessary” despite its “weighty” allegations. Plaintiffs were given the option to file an amended complaint going forward.

Binance’s $4.3 Billion Criminal Penalty and Its Tie to the Dismissed Case

Zhao argued in court filings that plaintiffs sought to exploit Binance’s prior criminal proceedings. In November 2023, Binance pleaded guilty to violating federal anti-money-laundering and sanctions laws.

The exchange paid a $4.32 billion criminal penalty as part of that resolution. Zhao contended the plaintiffs tried to “piggyback” on that case to pursue triple damages under the Anti-Terrorism Act.

The court rejected that approach and dismissed all claims against the defendants. Both Binance and Zhao had condemned terrorism throughout their court filings. Their papers made clear that neither party sought to support or facilitate any terrorist activity.

Following the ruling, a Binance spokesperson issued a statement: “Binance was pleased to see that the court in this case correctly dismissed these baseless allegations. Binance takes compliance seriously and has no tolerance for bad actors on its platform.” The exchange also referenced a letter sent to Senator Blumenthal on the same day.

Neither Zhao’s legal team nor the plaintiffs’ lawyers were immediately available for comment. Plaintiffs retain the right to file an amended complaint following the dismissal. No timeline for a potential refiling has been publicly announced as of Friday.

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