A federal appeals court has ruled that crypto theft victims can sue Binance in US courts, rejecting the exchange’s attempt to push their claims into arbitration under terms they never signed.
The Eleventh Circuit granted a writ of mandamus on Wednesday, a rare remedy forcing a lower court to correct a clear error. The panel directed a Florida district court to vacate its previous arbitration order.
Lawsuit Details and Allegations
Eight theft victims filed proposed class actions against Binance Holdings, BAM Trading Services (which operates Binance.US), and founder Changpeng Zhao. None of the plaintiffs ever held a Binance account or accepted its Terms of Use.
The plaintiffs allege that criminals drained their wallets and subsequently laundered the proceeds through the exchange. Their complaints cite the Racketeer Influenced and Corrupt Organizations (RICO) Act, conversion, and consumer protection laws in California and Massachusetts.
According to the complaints, Binance operated an unlicensed money transfer business and disregarded the Bank Secrecy Act, a US law requiring financial institutions to detect and report suspicious transactions.
A judge in the Southern District of Florida had previously sent the dispute to arbitration by relying on equitable estoppel, a legal doctrine that can force non-signers into a contract's arbitration clause if they benefit from the agreement. However, the three-judge appeals panel called that a misreading, stating that the claims rest on a duty otherwise imposed by law rather than Binance’s terms.
Implications for the Exchange
David Silver, founder of the firm Silver Miller representing the victims, stated that Binance had instructed his clients to arbitrate individually in Hong Kong. Federal law normally bars appeals of orders compelling arbitration, making the writ of mandamus the plaintiffs' only exit after a two-year legal battle.
The compliance allegations align with previous admissions by Binance. In November 2023, the exchange pleaded guilty to Bank Secrecy Act violations and operating an unlicensed money transmitting business, paying a $4.3 billion resolution. Prosecutors noted the platform never filed a single suspicious activity report with FinCEN, and founder Changpeng Zhao admitted to failing to maintain an anti-money laundering program, serving a four-month prison sentence in 2024.
The case now returns to the Southern District of Florida, where the civil RICO count allows for triple damages if the victims prevail.
