The Binance cryptocurrency exchange is experiencing significant institutional pressure following the presidential pardon of founder Changpeng Zhao (CZ) on October 23, 2025, alongside a civil lawsuit of approximately $1 billion filed by victims of the October 7 attack. The lawsuit accuses the exchange of facilitating transfers to terrorist organizations. Binance, which handles daily spot trading volumes of nearly $15 billion, now faces immediate legal and regulatory challenges that could impact its operations and user trust.
Legal Context and User Experience Implications
The presidential pardon for CZ was described as “complete and unconditional” following his guilty verdict for violations of U.S. anti-money laundering laws and subsequent four-month imprisonment served in September 2024. The pardon sparked public condemnations from over two dozen members of Congress and senators, including Elizabeth Warren, along with calls for a Senate vote to censure the measure. The president claimed to have “no idea” who Zhao was and asserted that “what he did isn’t even a crime,” with both parties denying any improper payment or arrangement.
Simultaneously, a federal judge has authorized a lawsuit filed in North Dakota to proceed, involving more than 300 plaintiffs seeking compensatory and treble damages under U.S. antiterrorism law. The lawsuit alleges that Binance facilitated transfers exceeding $1 billion to Hamas, Hezbollah, and other groups. It cites suspicious transactions, including an account associated with a Venezuelan woman and a Brazilian ranching company that recorded deposits of more than $177 million and withdrawals of $130 million after 2022—patterns that typically should trigger compliance alerts.
The exchange’s legal troubles extend internationally, with investigations in France for alleged money laundering and tax fraud, as well as scrutiny from India’s Financial Intelligence Unit regarding flows linked to Binance and WazirX—reportedly around 1,000 crore INR according to the complaint. Additional accusations related to market manipulation and listing fees further complicate the platform’s global operations.
For product teams and institutional users, these developments create increased friction in on-/off-ramps and compliance processes. UX teams face practical challenges including greater latency in onboarding due to expanded controls, additional legal data in confirmation modals, increased manual reviews for transactions, and reduced compatibility with non-custodial wallets.
Binance has attempted to address security concerns by highlighting its operational safeguards, including:
- A $1 billion insurance fund (SAFU) to reimburse users after security breaches
- 47,000 addresses blocked in 2024
- An estimated $129 million in prevented losses
However, these security measures primarily address technical risks rather than regulatory compliance issues that require enhanced KYC/AML protocols—implementations that typically increase operational steps and reduce conversion rates for both retail and enterprise users. Without a clear technical transparency narrative and accessible compliance dashboards, institutional perception of risk could lead to liquidity withdrawal and stricter conditions for custodians and market makers.
The next critical milestones will be the resolution of motions in the North Dakota federal court and any formal Senate vote regarding the pardon, which will define the scope of operational risk and establish priorities for redesigning Binance’s compliance workflows.
