Victims of State-Sponsored Terrorism File Lawsuit Against DOJ Over Binance Settlement Funds

Victims of State-Sponsored Terrorism File Lawsuit Against DOJ Over Binance Settlement Funds

Four victims or their family members of state-sponsored terrorism have initiated legal action against the U.S. Department of Justice (DOJ), alleging improper withholding and delays in the distribution of funds from Binance's $4.3 billion settlement. The lawsuit was filed on September 25 in a federal court in Washington, D.C., and claims the DOJ has failed to deposit the settlement proceeds into the mandated Victims of State Sponsored Terrorism Fund.

According to the plaintiffs, the Victims of State Sponsored Terrorism Act requires that 100% of criminal proceeds and 75% of civil proceeds from relevant cases be allocated to this fund, established to provide compensation to those affected by state-sponsored acts of terror. However, the DOJ is said to have deposited only $898.6 million into the fund to date.

In response to the lawsuit, the DOJ has expressed plans to allocate at least $1.5 billion to a fund for crime victims, which the plaintiffs argue is contrary to legal requirements. They are seeking a court order that compels the DOJ to transfer all qualifying proceeds from the Binance settlement to the Victims Fund.

The lawsuit also names several key figures and agencies as defendants, including U.S. Attorney General Merrick Garland, the Commodity Futures Trading Commission (CFTC), the Treasury Department, and its associated agencies, such as the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC).

In November 2023, Binance, the largest cryptocurrency exchange globally, pleaded guilty to breaching U.S. sanctions and the International Emergency Economic Powers Act, agreeing to pay over $4.3 billion in fines and forfeitures. Former CEO Changpeng Zhao also admitted to a felony charge related to Bank Secrecy Act violations, paid a $50 million penalty, and resigned, receiving a four-month jail sentence, with his release scheduled for September 29.

The DOJ's investigation into Binance commenced in May 2023, focusing on allegations that the exchange continued to offer services to Russian clients after sanctions were imposed in April 2022.

In a separate development, Binance announced its assistance to India's Enforcement Directorate in dismantling a $47.6 million gaming scam connected to the Fiewin app. The exchange's Financial Intelligence Unit provided critical information that helped trace the funds involved in the scam, which deceived victims through online betting and gaming schemes.

Additionally, Binance has launched a new pre-market spot trading service, becoming the first cryptocurrency exchange to offer trading of actual tokens before their official market listing. However, this service is restricted in certain jurisdictions, including the U.S., Canada, Dubai, Japan, the Netherlands, Russia, and Spain, due to regulatory limitations.