Two years after the Hamas attack on Israel on October 7, 2023, families of the victims have initiated legal action against Binance, a prominent cryptocurrency exchange that has faced numerous controversies. In a court filing dated November 24, 2025, attorneys representing over 300 victims and their families accused Binance and its former CEO, Changpeng Zhao—who was recently granted a pardon—of deliberately neglecting anti-money-laundering regulations as well as “know your customer” protocols, which mandate financial institutions to verify the identities of individuals engaging in transactions. The lawsuit claims that Binance and Zhao, who pleaded guilty to money laundering offenses in 2023, enabled terrorist organizations designated by the U.S., such as Hamas and Hezbollah, to launder approximately $1 billion. Although Binance has refrained from commenting on the lawsuit, the platform issued a statement asserting its full compliance with globally recognized sanctions laws.
### Broader Implications of the Binance Lawsuit
The issues raised in the Binance lawsuit extend beyond merely U.S.-designated terrorist organizations. As a specialist in combating the spread of weapons technology, I contend that the allegations surrounding Binance and Hamas could signify a larger trend regarding the use of cryptocurrency to jeopardize international security and, at times, U.S. national security. Cryptocurrencies are being utilized by nations like North Korea, Iran, and Russia, as well as various terrorism and drug trafficking groups, to finance and acquire billions of dollars worth of technology for illegal weapons initiatives. Although some enforcement actions are ongoing, the cryptocurrency’s embrace during the Trump administration may undermine the U.S.’s capacity to combat the illicit funding of military technologies. Experts, including Professor Yesha Yadav, Professor Hilary J. Allen, Graham Steele from the anti-corruption organization Transparency International, and even the U.S. Treasury, caution that existing legislative loopholes could further endanger American national security.
### Evasion of Sanctions through Cryptocurrency
For over a decade, the Project on International Security, Commerce, and Economic Statecraft, where I serve as a research fellow, has been researching and engaging with both industry and government to assist nations in thwarting the proliferation of dangerous weapon technologies, including the utilization of cryptocurrency for fundraising and money laundering related to weapons. Throughout this period, there has been a noticeable rise in the use of cryptocurrency for laundering and raising funds for weapons programs, as well as serving as a sophisticated mechanism to circumvent sanctions. State actors from Iran, North Korea, and Russia have exploited enforcement gaps, legal loopholes, and the ambiguous nature of cryptocurrency to facilitate the laundering and acquisition of weapons technology. For instance, reports from 2024 suggested that approximately 50% of North Korea’s foreign currency was derived from cryptocurrencies obtained through cyberattacks.
### Digital Crime: A New Era of Bank Heists
In February 2025, North Korea orchestrated a theft of over $1.5 billion in cryptocurrency from Bybit, a cryptocurrency exchange based in the United Arab Emirates. This incident can be likened to a modern-day bank robbery. Bybit was engaged in routine transfers of cryptocurrency from secure offline wallets to “warm wallets” that are accessible online yet require human validation for transactions. North Korean operatives tricked a developer working with Bybit into installing malware, which allowed them to bypass multifactor authentication. This breach enabled North Korea to redirect the cryptocurrency transfers to its own accounts. Although some of the stolen funds have been recovered, a significant portion remains untraceable. The FBI eventually associated the breach with TraderTraitor, a North Korean cyber group involved in various cyber operations.
### Gaps in Cryptocurrency Security Measures
Cryptocurrency is appealing due to the simplicity with which it can be obtained and transferred across accounts and various digital currencies, often with minimal identity verification. As countries like Russia, Iran, and North Korea face increasing international sanctions, they are increasingly relying on cryptocurrency to generate funds and procure materials for their weapons programs. Even stablecoins, which the Trump administration marketed as safer alternatives tied to fiat currencies like the U.S. dollar, have shown extensive misuse linked to financing illicit arms initiatives. While traditional financial systems have established safeguards to deter money laundering, recent studies indicate that the cryptocurrency sector continues to fall short in enforcing anti-money-laundering measures. In some instances, this may be a deliberate oversight, as certain crypto companies could be motivated by profit, ideological beliefs, or disagreements over the accountability of platforms for users’ actions.
Concerns extend beyond just the fundraising by rogue states and terrorist organizations, which often capture public attention. A more pressing danger lies in the ability to discreetly launder funds through intermediary companies, allowing individuals to sidestep the scrutiny of conventional financial networks while transferring funds from various sources to acquire equipment and technology. The sheer volume of cryptocurrency transactions, along with the multitude of centralized and decentralized exchanges and brokers, combined with limited regulatory oversight, makes cryptocurrency an exceptionally effective tool for laundering funds related to weapons programs. This situation is exacerbated by inadequate “know your customer” guidelines that banks must adhere to in order to prevent financial crimes, which should apply equally to entities facilitating the movement, storage, or transfer of cryptocurrencies, known as virtual asset service providers (VASPs). However, enforcement remains a challenge, given the vast number of VASPs across different jurisdictions, each with varying levels of regulatory commitment.
### The High Stakes of Cryptocurrency in Rogue States
The potential rewards for rogue nations and organizations like North Korea are substantial. North Korea has demonstrated a keen ability to exploit cryptocurrencies as a means to evade sanctions. The country has developed an extensive cyber program designed specifically to navigate these restrictions, heavily relying on cryptocurrency. While the total amount of funds North Korea has raised or laundered for its weapons initiatives via crypto remains uncertain, it is estimated that over the past 21 months, the nation has pilfered at least $2.8 billion in cryptocurrencies. Iran has also begun to utilize cryptocurrency to facilitate oil sales associated with weapons programs, both for itself and for proxy groups such as the Houthis and Hezbollah, supported in part by Iran’s own crypto exchange, Nobitex. Additionally, Russia has expanded its use of cryptocurrency beyond mere fundraising and laundering, now employing it to acquire materials and technologies for its ongoing conflict in Ukraine.
### Concerns Regarding National Security
In light of these serious and growing threats, there has been a noticeable retreat in enforcement actions by the U.S. government. The controversial pardon of Binance founder Changpeng Zhao has raised concerns about the implications for U.S. commitment to enforcing sanctions in the cryptocurrency sector. Other actions, such as the deregulation of banking practices involving cryptocurrency and the closure of the Department of Justice’s cryptocurrency fraud unit, have significantly hindered the U.S.’s capability to prevent the use of cryptocurrencies to finance weapons programs. The U.S. has also shifted away from “regulation by prosecution” and has withdrawn from numerous investigations aimed at enforcing regulations designed to thwart tactics employed by entities like North Korea, including abandoning a complex legal case concerning sanctions against a mixer allegedly utilized by North Korea. These developments send a troubling message. Currently, cryptocurrency is being illicitly employed to fund weapons programs that pose a direct threat to American security. This is an urgent issue that requires serious attention. While some enforcement initiatives remain in place, the lack of proactive safeguards means that cryptocurrencies will likely continue to be exploited for financing weapons programs. While cryptocurrency has legitimate applications, neglecting the risks associated with laundering and evasion of sanctions will ultimately compromise American national interests and global security.
