CZ: Centralized exchanges have ‘no incentive’ to support terrorists as US court throws out Binance case
A United States federal court has dismissed a high‑profile lawsuit accusing Binance, its former CEO Changpeng “CZ” Zhao and Binance.US operator BAM Trading Services of facilitating terrorism financing – a decision CZ is now using to argue that centralized exchanges have no economic or strategic reason to work with terrorist groups.
In a detailed ruling, the US District Court for the Southern District of New York rejected claims filed on behalf of more than 500 individuals connected to victims of dozens of terrorist attacks. The plaintiffs alleged that crypto transactions routed through Binance indirectly supported organizations such as Hezbollah, Hamas, ISIS, al‑Qaeda and Palestinian Islamic Jihad.
CZ: Terrorist users are “bad business” for exchanges
Reacting to the court’s decision, CZ took to X to push back against the broader narrative that centralized exchanges are a natural haven for terrorist financing.
According to Zhao, the business model of centralized exchanges (CEXs) makes it irrational to knowingly deal with designated terrorist groups. He argued that such users contribute almost nothing to trading volume or long‑term revenue and are instead likely to make brief deposits and immediate withdrawals, leaving little opportunity for the platform to profit.
He insisted there is “zero motive” for a CEX to provide any form of assistance – active or passive – to terrorist actors. From his perspective, the regulatory, legal and reputational risks associated with even the perception of enabling terrorism vastly outweigh any hypothetical short‑term gain.
Lawsuit represented hundreds of victims and relatives
The case, ultimately thrown out at the pleading stage, sought to hold Binance and its leadership civilly liable for injuries and deaths caused by terrorist attacks between 2016 and 2024.
Court documents state that the plaintiffs represented 535 individuals linked to victims of 64 separate incidents. Those attacks were attributed to multiple militant organizations formally designated as terrorist groups by the United States and other jurisdictions.
The plaintiffs claimed that those groups – or organizations and individuals associated with them – were able to move funds through Binance, allegedly benefiting from the exchange’s services and compliance gaps. On that basis, they sought damages under two powerful US statutes designed to target anyone who materially assists terrorism.
Claims brought under ATA and JASTA
The legal action relied on the US Anti‑Terrorism Act (ATA) and the Justice Against Sponsors of Terrorism Act (JASTA). Together, these laws allow victims of terrorism, or their families, to seek civil damages from individuals and entities accused of aiding, abetting or otherwise supporting terrorist acts, even indirectly.
To succeed, plaintiffs typically must show more than the simple existence of a business relationship. They need to plausibly allege that the defendant knowingly provided substantial assistance to a terrorist organization, and that this assistance was closely connected to, or a proximate cause of, the attacks that harmed them.
In this case, the plaintiffs argued that by allegedly failing to enforce robust anti‑money laundering controls and by permitting certain users to transact relatively anonymously, Binance provided the infrastructure that helped terrorist entities move, store or convert their funds.
Judge: No plausible link between Binance and specific attacks
Judge Jeannette A. Vargas ultimately concluded that the complaint did not cross the legal threshold required to move forward. While the filing described supposed compliance failures and claimed illicit usage of the platform, the court found that the plaintiffs did not plausibly connect Binance’s conduct to the specific attacks that caused their injuries.
The ruling emphasized that simply operating a large global exchange where bad actors may attempt to transact is not, by itself, enough to establish civil liability under ATA or JASTA. The plaintiffs, according to the court, failed to allege a sufficiently direct relationship between Binance’s alleged actions and the individual terror incidents listed in the complaint.
As a result, the judge dismissed the case at the pleading stage, before discovery or trial. However, the court did allow the possibility of a revised filing, stating that any amended complaint must be submitted within 60 days if the plaintiffs wish to attempt another legal route.
Binance continues to fight accusations linked to Iran
The dismissal comes at a moment when Binance remains under intense scrutiny from US lawmakers and regulators, especially concerning transactions involving sanctioned jurisdictions and entities.
On the same day the ruling was announced, Binance was actively contesting accusations from a group of 11 US senators who had questioned whether the exchange allowed transactions tied to Iranian parties. In a formal response addressed to Senators Richard Blumenthal and Ron Johnson, Binance claimed that the senators’ earlier inquiry relied on reports that were “demonstrably false” and lacked reliable evidence.
Those political concerns followed media claims that Binance processed more than $1 billion worth of crypto transactions connected to Iranian entities referred to as Hexa Whale and Blessed Trust. Some reports even alleged that employees who raised sanctions‑related concerns internally were later dismissed, a narrative the company has strongly pushed back against.
Why CEXs argue they are poor tools for terrorism financing
Beyond legal arguments, CZ’s comments highlight a broader industry claim: centralized exchanges, when operating under even minimal regulatory oversight, are far from ideal tools for terrorist financing.
Unlike cash or poorly monitored informal transfer systems, CEXs typically maintain detailed user records, run know‑your‑customer (KYC) checks and log every on‑chain transaction. This creates a permanent digital trail that can be analyzed by law enforcement and blockchain analytics firms long after funds have moved.
From a purely operational standpoint, terrorist organizations seeking secrecy may find it safer to avoid centralized platforms that can freeze assets, cooperate with law enforcement and comply with sanctions lists. This is a key point exchanges often stress when rejecting accusations that they “prefer” or “enable” such users.
Legal distinction: misuse of a platform vs. platform liability
The court’s reasoning also underscores a critical legal distinction that will likely recur in future crypto cases: the difference between criminals misusing a technology and the responsibility of the provider of that technology.
For a platform to face civil liability under terrorism laws, plaintiffs must show more than the fact that wrongdoers used it. They must demonstrate knowledge, intention or at least reckless disregard, and a concrete connection between the platform’s conduct and the actual harm suffered.
In the Binance case, the judge signaled that allegations of general compliance shortcomings are not enough. Without a clear chain of causation – showing how specific support from Binance substantially assisted particular attacks – the complaint could not stand.
Growing pressure on exchanges to prove compliance
Even with this courtroom win, Binance and other major exchanges face a growing expectation from regulators and politicians to actively prove that their systems are robust enough to deter abuse.
This goes beyond batch KYC procedures and includes transaction monitoring, sanctions screening, suspicious activity reporting and cooperation with law enforcement. Regulators increasingly want to see evidence that platforms can identify high‑risk users or wallets, react quickly to red flags and keep detailed audit trails.
In practice, this means exchanges are under pressure to invest heavily in compliance departments, blockchain analytics tools and internal training. Failing to do so may not immediately result in liability under terrorism statutes, but it can invite enforcement actions, fines or licensing issues under broader financial crime and sanctions frameworks.
What the ruling means for future crypto‑terrorism cases
The dismissal of this lawsuit does not close the door on all terrorism‑related claims against crypto platforms, but it does set an important benchmark. It signals that US courts may require a high degree of specificity and causal connection before allowing similar cases to proceed.
Future plaintiffs will likely need to present more granular evidence: direct links between identifiable exchange accounts, known terrorist operatives and specific attacks, plus indications that the platform knew or should have known what was happening and failed to act.
For exchanges, the case is a reminder that legal risk is no longer confined to regulators; victims and their families are increasingly willing to test the boundaries of civil liability in court.
Crypto’s broader reputational battle
Beyond the legal arena, this case feeds into a wider reputational struggle for the crypto industry. Headlines tying digital assets to terrorism, sanctions evasion or organized crime can shape public opinion and influence legislative agendas, even when courts or forensic analyses later soften or contradict the initial narrative.
Industry leaders therefore view cases like this not only as legal tests but as public‑relations battles. For Binance, a dismissal at the pleading stage is a significant talking point at a time when the company is trying to reposition itself under heightened regulatory oversight and after leadership changes at the top.
At the same time, lawmakers and advocacy groups will likely continue pressing for tighter controls, more transparency and clearer accountability mechanisms to ensure that exchanges, wallets and other intermediaries cannot be easily exploited by designated terrorist organizations.
Outlook: tougher questions, higher standards
Going forward, centralized exchanges can expect more frequent and more pointed questions about how they handle high‑risk users, sanctioned jurisdictions and politically exposed wallets. Even when lawsuits like this one fail, they often reveal gaps in public understanding of how crypto infrastructure works – and where the real vulnerabilities lie.
For now, CZ’s stance is clear: in his view, centralized platforms have every incentive to distance themselves from terrorism, both economically and reputationally. The recent court ruling does not settle the global debate over crypto and terrorism financing, but it does illustrate how difficult it is, under current law, to turn broad moral accusations into successful civil claims against a major exchange.