Binance’s Response to Skyline's Letter on Seizure of Palestinian Cryptocurrency Wallets

On August 26, allegations surfaced that Binance, the world's largest cryptocurrency exchange, had frozen all Palestinian cryptocurrency wallets at the request of the Israeli Defense Forces (IDF) for allegedly being linked to “illicit funds”. This claim, made by Ray Youssef, CEO of Noone crypto wallet, sparked outrage and concern, particularly given the dire humanitarian crisis and severe financial hardships currently facing Palestinians in Gaza due to ongoing genocide and an economic blockade. 

Since the war on Gaza began in October 2023, Israel has waged a brutal campaign of total warfare under the guise of “combating terrorism.” This strategy severely hampered access to essential resources, cutting off 83% of food aid to Gaza and halting essential humanitarian aid, including financial support. The request from Israel to freeze Palestinian crypto wallets further tightens the grip on the Palestinian population, restricting their access to vital resources and exacerbating their suffering. 

Skyline International for Human Rights invited Binance to provide clarity on the mass seizure, including the criteria used, due diligence conducted, and the rights of users to appeal the decision. While some answers were provided, several critical details are still lacking. 
 
The Extent of the Freeze 

Binance acknowledged that “In October 2023, we were asked to freeze more than 1,500 user accounts”. However, after conducting due diligence and verification, they stated that “We ended up freezing only 220 accounts in Palestine linked to illicit activity.” They explained that this represented less than 0.1% of the total registered users in Palestine on their platform, suggesting a targeted approach rather than a blanket freeze.

While this provides a sense of scale, Binance did not elaborate on what constitutes "illicit activities" or how the determination is made. Without a clear and publicly accessible framework outlining the criteria used to identify such activities, there's a risk of overreach, where legitimate users could be mistakenly flagged and subjected to account freezes. This ambiguity can erode user trust and confidence in platform security, particularly as it leaves room for subjective interpretations and potentially discriminatory actions against Palestinian users.

Criteria for Account freezes

Binance explained that its actions were in line with international standards that all financial institutions must follow, in particular the Anti-Money Laundering/ Countering The Financing Of Terrorism (AML/CFT) standards in order to ensure user safety. Nevertheless, the exchange has yet to disclose the specific criteria used to determine which accounts were blocked.  Additionally, there was no mention of whether advance notice was given to users whose accounts were frozen or if they were provided clear and detailed explanations. 

The lack of transparency regarding the criteria and the process of notification and communication with affected users is troubling, especially for Palestinians, who rely heavily on cryptocurrency as a financial lifeline amidst a collapsing traditional banking infrastructure.

Appeals and Redress Mechanisms 

A critical gap in Binance’s response is the absence of information on an appeals process or any steps users can take to challenge account freezes. The lack of a clear and accessible mechanism for appeal leaves users in a state of uncertainty, as they may have no formal recourse if they believe their accounts were frozen in error.

This situation is further complicated by reports that some users have received notifications attributing the account blocks to Israeli law enforcement, including the police, the National Counter-Terrorism Unit​​, and the Cybercrime Unit. This creates a problematic paradox where reaching out to the Israeli authorities—who are responsible for war crimes, atrocities, and the annihilation of Palestinians—could put them in jeopardy, even for those with legitimate accounts. 

The fear of potential repercussions from these agencies creates a chilling effect, preventing affected users from seeking redress for their blocked funds. Thus, Palestinians find themselves in a precarious position, trapped between the need to access their funds and the very real danger of engaging with the entities responsible for their oppression.

Skyline reviewed all seizure orders for cryptocurrency wallets issued by the Israeli National Bureau for Counter Terror Financing between January 1, 2023, and October 1, 2024. These seizures are carried out under Israel's Anti-Terrorism Law of 5576—2016, which allows the confiscation of crypto property and assets associated with designated "terrorist organizations." However, the application of this law lacks transparency and often proceeds without sufficient evidence. 

The orders do not provide case numbers, details of the modus operandi, or clear connections between the clients grouped under each order. Instead, the seizures are justified by the assertion that authorities are “convinced” that the cryptocurrency wallets listed are the “property” of entities labeled as terrorist organizations, despite many accounts showing no clear ties to any Palestinian political party.

Human Rights Due Diligence 

Binance did not provide details about their human rights due diligence assessment, nor did they outline details on steps taken to mitigate the impact of account freezes on Palestinians' access to essential resources and humanitarian aid.

This gap in Binance’s response calls into serious doubt whether the company is aware of or prioritizes the humanitarian implications of its actions. If freezes are executed without proper due diligence or consideration of the local context, the consequences can be severe—impacting not just financial stability but the very survival of those affected.

A call for transparency and accountability 

While Binance has acknowledged freezing some accounts, critical details remain unclear. The lack of transparency on the criteria for freezes, the appeals process, and the due diligence conducted raises serious concerns about the fairness and proportionality of these actions.

As Palestinians in Gaza face one of the most severe humanitarian crises in recent history, freezing their crypto assets exacerbates their hardship. Financial institutions, especially in the decentralized crypto space, bear a significant ethical responsibility to ensure their actions do not worsen the suffering of an already oppressed population.

Binance’s vague responses fail to clarify how—or if—the company balances its regulatory obligations with its ethical responsibilities. While compliance with international standards is crucial, it shouldn't disproportionately harm those already facing a dire humanitarian catastrophe. 

A clear explanation of the rationale behind account freezes and steps to minimize collateral damage is urgently needed. As a major player in the crypto space, Binance must provide transparent and comprehensive answers to maintain trust and uphold its commitment to transparency and ethical business practices. 

Moving forward, we will continue to monitor this issue closely and advocate for more transparency from Binance. The humanitarian impact of their actions, especially in times of war, cannot be ignored. The world is watching, and the need for accountability has never been more urgent.

 

Read Skyline's Full Letter to Binance

Read Binance’s Response to Skyline

 

 

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