Two years after the Hamas attack on Israel on October 7, 2023, the families of victims have initiated legal action against Binance, a prominent cryptocurrency exchange that has faced numerous controversies. In a court filing dated November 24, 2025, representatives of 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 (AML) regulations and “know your customer” (KYC) protocols. These protocols are critical for financial institutions to verify the identities of their transaction participants. The lawsuit claims that through these oversights, Binance and Zhao, who admitted guilt to money laundering violations in 2023, enabled U.S.-designated terrorist organizations like Hamas and Hezbollah to launder approximately $1 billion. While Binance has refrained from detailed commentary on the lawsuit, they have stated their full compliance with internationally recognized sanctions laws.
### Broader Implications of the Binance Lawsuit
The allegations against Binance extend beyond just the actions of designated terrorist groups. As a specialist in countering the spread of weapon technology, I believe these claims could signify a larger issue regarding the use of cryptocurrency to threaten global security, and in specific cases, U.S. national security. Cryptocurrencies are being employed by nations such as North Korea, Iran, and Russia, as well as various terrorist and drug-related organizations, for financing and acquiring billions of dollars in technology for illicit weaponry. Although enforcement measures are ongoing, I contend that the previous administration’s acceptance of cryptocurrency might undermine the U.S.’s efforts to combat the illegal financing of military technologies. Experts, including academics and organizations like Transparency International and the U.S. Treasury, warn that legislative loopholes could further jeopardize American national security.
### A Mechanism for Evasion
For over a decade, the Project on International Security, Commerce, and Economic Statecraft, where I work as a research fellow, has focused on investigating and engaging with industry and government entities to combat the proliferation of dangerous weapon technologies. Our findings indicate a rise in the use of cryptocurrency for laundering money and fundraising for weapon programs, acting as a sophisticated means of evading sanctions. State actors from Iran, North Korea, and Russia exploit enforcement gaps and the ambiguous nature of cryptocurrency to finance their weapons technology endeavors. For instance, in 2024, it was estimated that nearly half of North Korea’s foreign currency earnings were derived from cryptocurrency gained through cyberattacks.
### A Digital Heist
In February 2025, North Korea executed a cyber operation that resulted in the theft of over $1.5 billion in cryptocurrency from Bybit, an exchange headquartered in the United Arab Emirates. This incident can be likened to a digital bank heist. Bybit was transferring cryptocurrency from secure offline wallets to “warm wallets,” which are connected to the internet but require human verification for transactions. North Korean operatives tricked a Bybit developer into installing malware, allowing them to bypass multifactor authentication. This breach enabled North Korea to redirect the cryptocurrency transfers to its own wallets, which were subsequently laundered through mixers and various other cryptocurrencies to obscure the funds’ origins. While some of the stolen assets have been recovered, a substantial amount remains untraceable. The FBI later associated the breach with North Korea’s cyber group TraderTraitor.
### Security Challenges with Cryptocurrency
Cryptocurrency’s allure stems from its easy accessibility and the ability to transfer assets between various accounts and currencies with minimal identification requirements. In light of international sanctions, countries like Russia, Iran, and North Korea have increasingly turned to cryptocurrency for fundraising and procuring materials for weapons initiatives. Even stablecoins, which were promoted by the Trump administration as safer options backed by tangible assets like the U.S. dollar, have been linked to extensive misuse for funding illicit weapon programs.
### Traditional Financial Networks vs. Cryptocurrency
Although traditional financial systems are not entirely immune to money laundering, they have established protocols designed to prevent the misuse of funds for illegal weapon programs. Recent analyses indicate that the cryptocurrency industry lags significantly in implementing anti-money-laundering measures, despite ongoing enforcement efforts. In some instances, this lack of compliance may be intentional, as certain crypto companies might seek to bypass regulations for profit or due to ideological beliefs regarding accountability for user actions.
### The Real Danger of Laundering Operations
The concern extends beyond the fundraising activities of rogue nations and terrorist groups, which often capture media attention. A more pressing issue is the capacity to discreetly launder funds through shell companies, allowing actors to evade scrutiny from traditional financial systems while transferring money for equipment and technology acquisitions. The vast number of cryptocurrency transactions, along with the multitude of centralized and decentralized exchanges and brokers, compounded by inadequate regulatory measures, has made cryptocurrency an effective tool for laundering funds intended for weapon programs. This situation is exacerbated by the absence of robust safeguards and KYC checks, which are mandatory for banks to prevent financial crimes.
### Substantial Gains for Rogue Nations
The potential rewards for countries like North Korea and organizations such as terrorist factions are significant. North Korea has adeptly utilized cryptocurrency to escape sanctions, establishing a sophisticated cyber infrastructure that heavily relies on digital currencies. Although the total amount raised or laundered by North Korea for its weapons initiatives via cryptocurrency remains uncertain, it is reported that the country has stolen at least $2.8 billion in crypto over the past 21 months. Iran has also turned to cryptocurrency as a means to facilitate oil sales connected to its weapons programs, both for itself and for allied groups like the Houthis and Hezbollah. This trend is partly supported by Iran’s own cryptocurrency exchange, Nobitex. Furthermore, Russia has evolved its cryptocurrency strategy from merely using it for fundraising to employing it to directly acquire weaponry and technology to sustain its military actions in Ukraine.
### National Security Risks
Despite these alarming and intensifying threats, the U.S. government is reducing its enforcement efforts. The controversial pardon of Binance founder Changpeng Zhao has raised concerns regarding the U.S. commitment to upholding sanctions in the cryptocurrency sector. Additionally, deregulating banking practices related to cryptocurrency and disbanding the Department of Justice’s crypto fraud unit have significantly weakened the U.S.’s capacity to disrupt the use of cryptocurrencies for financing weapons programs. The U.S. has also signaled an end to “regulation by prosecution,” pulling back from various investigations aimed at enforcing regulations against entities like North Korea. These developments, I believe, convey a troubling message. Presently, cryptocurrency is being misused to finance weapon initiatives that pose a risk to American security. This is a serious issue that warrants urgent attention. While some enforcement activities persist, the failure to proactively implement and uphold safeguards means that cryptocurrency will likely continue to facilitate the financing of weapon programs. Although cryptocurrency has legitimate applications, overlooking the risks associated with laundering and sanctions evasion will ultimately jeopardize American interests and global security.
