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 that forces a lower court to correct a clear error. The panel directed a Florida district court to vacate its arbitration order.

Court Says Victims Can Sue Binance Without Signing Its Terms

Eight theft victims filed proposed class actions against Binance Holdings, BAM Trading Services, which operates Binance.US, and founder Changpeng Zhao. None of them ever held a Binance account or accepted its Terms of Use.

They allege criminals drained their wallets, then laundered the proceeds through the exchange. The complaints cite the Racketeer Influenced and Corrupt Organizations (RICO) Act, conversion, and consumer protection laws in California and Massachusetts.

The plaintiffs say Binance ran an unlicensed money transfer business and disregarded the Bank Secrecy Act. That US law requires financial firms to detect and report suspicious transactions.

A judge in the Southern District of Florida sent the dispute to arbitration anyway, relying on equitable estoppel. The doctrine can force non-signers into a contract’s arbitration clause when they benefit from the agreement.

The three-judge appeals panel called that a misreading of the complaints. According to the order, the claims rest on a “duty otherwise imposed by law” rather than on Binance’s terms.

The procedural route matters. Federal law bars appeals of orders compelling arbitration, so mandamus was the victims’ only exit after two years of fighting over the forum. The panel also credited evidence they would forfeit claims and face unreasonable costs arbitrating abroad.

What the Ruling Means for Binance and Other Exchanges

David Silver founded Silver Miller, the firm representing the victims. He said Binance told his clients to arbitrate in Hong Kong, one case at a time.

“A contract you never signed shouldn’t keep you out of court,” Silver noted.

The compliance allegations track a record Binance has already admitted. The exchange pleaded guilty in November 2023 to Bank Secrecy Act violations and running an unlicensed money transmitting business.

It paid a $4.3 billion resolution, and prosecutors said it never filed a single suspicious activity report with FinCEN. Zhao admitted failing to maintain an anti-money laundering program and served a four-month prison sentence in 2024.

Laundering speed explains why victims target exchanges rather than thieves. Global Ledger’s review of 255 hacks worth $4.04 billion found stolen funds can move within two seconds of an attack.

Binance’s courtroom record remains mixed. It won dismissal of terror financing claims in March, yet investors filed a $200 million UK lawsuit in June over leveraged trading losses.

The case now returns to the Southern District of Florida, where the civil RICO count allows triple damages if the victims prevail. Other circuits may soon face the same question about non-customers and exchange arbitration clauses.

Source: BeInCrypto