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Families of Hamas victims have filed a lawsuit against the cryptocurrency exchange Binance in a federal court in Manhattan, alleging that the platform indirectly facilitated financial transactions for Hamas, Bloomberg News reported Feb. 1.

The lawsuit accuses Binance of enabling the terrorist organization to bypass sanctions and anti-money laundering laws, thus providing material support to terrorism. The plaintiffs are seeking compensatory and punitive damages in an effort to hold the exchange accountable.

The lawsuit

The lawsuit filed against Binance by families of Hamas victims alleges that from 2017 to 2023, Binance processed transactions that effectively allowed Hamas to evade international sanctions and anti-money laundering (AML) regulations, thereby supporting the organization’s terrorist activities.

Details from the lawsuit reveal that the plaintiffs include both individuals who have suffered directly from Hamas’ actions, such as hostages and relatives of deceased victims, and those who argue that Binance’s failure to prevent its platform from being used for terror financing has had devastating effects.

The lawsuit specifically targets Binance’s operations that purportedly allowed Hamas to conduct transactions via its platform, bypassing traditional banking systems and sanctions. It also names the former CEO of Binance, Changpeng Zhao, along with the governments of Iran and Syria, as defendants.

It is filed under the United States Anti-Terrorism Act, alleging that the defendants provided “substantial assistance” to terrorists.

Stricter oversight needed

This legal action is part of a broader scrutiny of cryptocurrency exchanges and their obligations under international financial regulations.

The case has attracted attention from various sectors, including U.S. lawmakers who have expressed concerns over the misuse of cryptocurrencies in terror financing. Senator Cynthia Lummis and Representative French Hill have both been vocal about the need for stringent oversight of cryptocurrency transactions to prevent their exploitation by terrorist networks.

Moreover, the lawsuit against Binance follows previous regulatory and legal challenges faced by the exchange, including fines for AML violations and the conviction of its former CEO. These incidents have exposed vulnerabilities within the crypto exchange’s operational frameworks, prompting calls for enhanced compliance protocols to prevent sanctioned entities and individuals from using these platforms for financial transactions.

This legal action against Binance marks a critical juncture in the ongoing debate over the accountability of cryptocurrency exchanges in preventing their services from being used for unlawful activities. The outcome of this lawsuit could lead to significant changes in the regulatory landscape for digital currencies, potentially establishing new precedents for the enforcement of AML and CTF regulations within the crypto sector.

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