Federal Judge Has Dismissed the Terrorism Financing Lawsuit Against Binance and its Founder

U.S. District Judge Jeannette Vargas in Manhattan has dismissed a civil lawsuit brought by 535 plaintiffs against Binance and founder Changpeng Zhao, ruling that the plaintiffs failed to establish a sufficient legal connection between the exchange and terrorist attacks.

What the Judge Actually Ruled

According to Reuters, the lawsuit alleged Binance facilitated hundreds of millions of dollars in transactions involving Hamas, Hezbollah, ISIS, and Al-Qaeda, and sought to hold the exchange liable for 64 terrorist attacks that occurred between 2017 and 2024. The plaintiffs were victims and relatives of victims of those attacks.

Judge Vargas dismissed the case on a specific legal ground. The plaintiffs did not plausibly demonstrate that Binance and Zhao had culpably associated themselves with the attacks. The distinction matters under the Anti-Terrorism Act, which requires more than general awareness of potential misuse. The judge acknowledged Binance may have had broad awareness that terrorist-affiliated accounts existed on the platform. She found that awareness alone does not meet the liability threshold.

Her characterisation of the relationship was precise. The only connection between Binance and the terrorist groups was that those groups or their affiliates held accounts on the exchange in an arm’s length manner. That is a very different legal standard than active facilitation or knowing support.

The Complaint Itself Drew Criticism

Beyond the substantive ruling, Judge Vargas took issue with the complaint’s construction. She described the 891-page, 3,189-paragraph filing as wholly unnecessary, finding that its scale did not translate into meeting the legal standards required. Length is not a substitute for the specific factual allegations the Anti-Terrorism Act demands.

The plaintiffs have been given 60 days to file an amended complaint addressing the identified deficiencies. The case is dismissed but not permanently closed.

CZ’s Response

Changpeng Zhao responded to the dismissal on X, stating that truth always comes with time and that centralised exchanges have no structural incentive to support terrorist financing. The comment was brief and did not address the specifics of the ruling.

The dismissal is a significant procedural win for Binance. It does not resolve the broader regulatory and legal scrutiny the exchange has faced, including CZ’s 2023 guilty plea to Bank Secrecy Act violations, for which he served a separate sentence. Those matters are distinct from this civil action.

The plaintiffs have 60 days to decide whether an amended filing can overcome the legal deficiencies the court identified. Whether that amended complaint materialises will determine if this case continues.

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