Binance, the world's largest cryptocurrency exchange, is facing a new lawsuit from three families of victims of the Hamas attack on Israel in October 2023. The plaintiffs accuse Binance, its former CEO Changpeng Zhao and the governments of Iran and Syria to provide "substantial assistance" to the so-called (misnamed?) Hamas terrorists, in violation of US anti-terrorism law. How did Binance get into this situation?
Binance was founded in 2017 by Changpeng Zhao, a Canadian of Chinese origin who became famous for becoming a billionaire in less than a year thanks to cryptocurrencies. This exchange quickly became the market leader, offering a wide variety of services, from trading more than 200 digital currencies to launching its own blockchain and its native token, BNB. Binance was also characterized by its flexibility and its ability to adapt to the different regulations of the countries in which it operated, moving its headquarters several times to avoid legal restrictions.
However, this strategy also earned him numerous criticisms and accusations of evading regulations and facilitating money laundering, tax evasion and illicit financing. In November 2023, Binance pleaded guilty to federal charges in the United States for violating the Bank Secrecy Act, failing to register as a money transmission business, and the International Emergency Economic Powers Act. As a result, it agreed to pay a fine of $4.3 billion and submit to extensive oversight by U.S. government agencies.
Changpeng Zhao, the founder and former CEO of Binance, also pleaded guilty to failing to maintain an effective anti-money laundering program, in violation of the Bank Secrecy Act. At one point he resigned from his position as CEO of the company as part of the agreement with US justice. However, his liability is not limited to his negligence in following the rules. According to the lawsuit by the families who consider themselves victims of Hamas, Zhao would have actively participated in the processing of transactions related to Palestinian terrorist groups between 2017 and mid-2023. The plaintiffs claim that Zhao provided a clandestine financing tool that the platform deliberately concealed. to US regulators. Unfortunately, this accusation casts much more shadow on the role of cryptocurrency exchanges in facilitating illicit financial activities.
The lawsuit also names the governments of Iran and Syria, alleging that these countries provided material support and resources to Hamas and other Palestinian terrorist groups. According to the plaintiffs, these countries used cryptocurrencies to evade international sanctions and finance their illicit activities. They also maintain that Binance and Zhao were complicit with these countries by allowing them to carry out transactions on their platform, violating US law that prohibits doing business with sanctioned entities.
The case against Binance, Zhao, Iran and Syria could become one of the most important in the history of cryptocurrencies, as it raises crucial questions about the regulation, security and liability of this sector. The case could set a precedent for other similar cases in the future, as well as prompt greater supervision and control by authorities. Another negative consequence is that it could also affect the reputation and trust of users in cryptocurrencies, especially those that offer a high degree of anonymity and privacy. On the other hand, the case could also generate greater awareness and education about the risks and benefits of cryptocurrencies, as well as encourage the development of innovative and ethical solutions for the sector.
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