Binance Faces Lawsuit Following Hamas Attack
Two years after the Hamas assault on Israel on October 7, 2023, families of the victims have initiated legal proceedings against Binance, a prominent cryptocurrency exchange that has encountered various controversies. In a filing on November 24, 2025, the representatives of over 300 victims and their families alleged that Binance, along with its former CEO Changpeng Zhao, who was recently pardoned, knowingly disregarded anti-money laundering (AML) regulations and “know your customer” (KYC) protocols, which mandate that financial entities confirm the identities of those conducting transactions. The lawsuit claims that this negligence enabled U.S.-designated terrorist organizations, including Hamas and Hezbollah, to launder approximately $1 billion. Binance has refrained from commenting on the ongoing case but has stated that it adheres fully to internationally recognized sanctions laws.
Wider Implications of the Binance Lawsuit
The issues raised in the Binance lawsuit extend beyond the allegations of facilitating financial transactions for terrorist groups. As a specialist in countering the spread of weapons technology, I believe these allegations may only scratch the surface of how cryptocurrencies are being exploited to threaten global security and, in some instances, U.S. national security. Nations such as North Korea, Iran, and Russia, alongside various terrorist and drug-trafficking organizations, are reportedly using cryptocurrency to fund and acquire billions of dollars in technology for illicit arms programs. Although some regulatory actions are ongoing, concerns linger that the previous administration’s favorable stance toward cryptocurrencies could hinder the U.S.’s capacity to combat the illegal financing of military technology. Experts, including scholars and organizations such as Transparency International, have raised alarms that existing legislative loopholes could further endanger American national security.
Cryptocurrency as a Sanctions Evasion Tool
Over the past 13 years, the Project on International Security, Commerce, and Economic Statecraft, where I work as a research fellow, has investigated and engaged with industry and government bodies to combat the proliferation of dangerous weapons technology, particularly focusing on the role of cryptocurrency in financing and laundering money for weapons. Throughout this period, we have observed a troubling rise in the use of cryptocurrencies for both laundering and raising funds for weapons initiatives, serving as a sophisticated method for circumventing sanctions. State actors from Iran, North Korea, and Russia exploit gaps in enforcement, regulatory loopholes, and the ambiguous nature of cryptocurrency to finance and source materials for weapons technology. For instance, it was estimated in 2024 that nearly half of North Korea’s foreign revenue originated from cryptocurrency obtained through cybercrime.
A Digital Heist: North Korea’s Crypto Theft
In February 2025, North Korea orchestrated the theft of more than $1.5 billion in cryptocurrency from Bybit, a cryptocurrency exchange located in the UAE. These incidents can be likened to modern digital bank robberies. During a routine transfer of cryptocurrency from secure offline wallets to online wallets that require human verification, North Korean operatives tricked a developer into installing malware that allowed them to bypass multifactor authentication. This breach enabled North Korea to redirect the cryptocurrency transfers to its own accounts. Once the funds were secured in wallets controlled by North Korea, they were laundered through mixers and a variety of cryptocurrencies, effectively obscuring their origins. While some of the stolen funds have been recovered, a significant portion remains untraceable. The FBI has since attributed the cyberattack to the North Korean cyber group TraderTraitor, part of a broader network engaged in cyber warfare.
Challenges in Cryptocurrency Security
The appeal of cryptocurrency lies in its ease of acquisition and the seamless transfer process between various accounts and currencies, often with minimal identification requirements. As nations like Russia, Iran, and North Korea face stringent international sanctions, they are increasingly turning to cryptocurrency to generate funds and procure materials for their arms initiatives. Even stablecoins, which the Trump administration promoted as safer alternatives due to their backing by stable assets like the U.S. dollar, are being misappropriated to finance illicit arms programs. While traditional financial systems are not immune to money laundering, they have established mechanisms designed to prevent the funding of illegal weapons activities. However, recent analyses reveal that the cryptocurrency sector continues to lag in implementing effective anti-money laundering measures. In some instances, this lack of compliance may be intentional, as certain crypto companies seek to bypass regulatory frameworks for profit or due to ideological beliefs about accountability.
The Risks of Laundering Funds in Cryptocurrency
The potential rewards for rogue nations and organizations like North Korea are substantial. North Korea has adeptly capitalized on the advantages of cryptocurrency, establishing a sophisticated cyber operation focused on evading sanctions through digital means. While the total amount of funds raised or laundered for its weapons program via cryptocurrency remains uncertain, reports indicate that the nation has siphoned at least $2.8 billion in crypto over the last 21 months. Iran is similarly leveraging cryptocurrency to facilitate oil sales tied to its weapons programs, supporting both itself and allied groups such as Hezbollah and the Houthis through its own crypto exchange, Nobitex. Russia has taken this a step further, utilizing cryptocurrency not just for fundraising but for directly acquiring materials and technologies that support its military efforts against Ukraine.
Concerns Over National Security and Regulatory Actions
Despite the pressing and escalating threats posed by the misuse of cryptocurrency, the U.S. government appears to be retreating from stringent enforcement measures. The controversial pardon of Binance founder Changpeng Zhao raises concerns about the implications for U.S. commitment to regulating the cryptocurrency sector. Other actions, such as the deregulation of cryptocurrency use in banking and the closure of the Department of Justice’s crypto fraud unit, have significantly weakened the U.S.’s capacity to prevent the funding of weapons programs through cryptocurrencies. Additionally, the U.S. has pledged to cease “regulation by prosecution” and has abandoned several investigations into failures to enforce the regulations aimed at preventing the financial maneuvers of entities like North Korea. Such moves, in my view, convey a dangerous message. Currently, cryptocurrencies are being improperly utilized to finance arms initiatives that jeopardize American security. This issue is serious and warrants immediate attention. While some enforcement actions continue, neglecting to implement and uphold preventive measures means that cryptocurrencies will persist in being used to underwrite weapons programs. While cryptocurrency offers legitimate applications, failing to address the risks associated with money laundering and sanctions evasion could undermine American interests and global security.
