None of them ever signed up for Binance. A Florida judge sent them to arbitration anyway. On appeal, the Eleventh Circuit found the district court had 'misread the complaints' and freed the plaintiffs to sue in federal court.
The US Court of Appeals for the Eleventh Circuit granted a writ of mandamus on 19 August, freeing eight cryptocurrency theft victims from a Florida arbitration order that would have kept their claims against Binance out of federal court entirely. Their lawsuit accuses Binance Holdings, BAM Trading Services and Changpeng Zhao of racketeering, consumer protection violations, and running an unlicensed money-transfer business.
None of the eight ever opened a Binance account. That is the point. The claimants say their crypto was stolen or fraudulently obtained by third parties and then laundered through Binance's platform. A Florida district judge nevertheless compelled arbitration under Binance's terms of service on 16 March, reasoning that anything touching Binance's rails could be pulled into Binance's dispute-resolution regime. The appellate panel disagreed sharply and told the lower court it had 'misread the complaints.'
Writs of mandamus are unusual. Appellate courts generally do not intervene in interlocutory rulings; the party has to wait until the case ends and then appeal the whole thing. Granting mandamus here means the Eleventh Circuit saw a clear enough legal error, and a clear enough harm from waiting, to skip the usual process. That is a stronger signal than a routine reversal.
The practical effect is procedural rather than substantive. The ruling does not decide whether Binance violated RICO, whether it operated an unlicensed money transmitter, or whether it turned a blind eye to laundered funds. It only decides that eight people who never agreed to Binance's terms cannot be forced to litigate their claims in a private arbitration forum that Binance largely controls. They now get discovery, a public docket, and a jury pool.
That is a significant shift in leverage. Arbitration clauses have insulated centralised exchanges from meaningful litigation for years, on the argument that anyone whose funds ever touched the platform must have implicitly accepted its terms. The Eleventh Circuit's ruling narrows that argument to actual signatories. Victims of crypto theft, a large and growing population, no longer have to route their claims through JAMS panels if they can plead their way past the terms-of-service defence.
Binance's exposure in the underlying case is not trivial. RICO claims carry treble damages and attorney fees. Consumer protection statutes in several states add their own penalties. Running an unlicensed money-transfer business is a federal crime under 18 USC 1960, and the civil analogue has been used against exchanges before. The plaintiffs will still have to prove that Binance had actual knowledge of the laundering activity, or at least wilful blindness to it, but they now get to try in a courtroom rather than a closed forum.
The company has spent the past three years trying to close its US legal chapter. Changpeng Zhao pleaded guilty to money laundering in 2023, served four months in a federal prison, and received a presidential pardon from Donald Trump in March. BAM Trading Services, the entity that operated Binance.US, wound down dollar deposits after the SEC's 2023 enforcement action. Both entities remain defendants in this case, and the Eleventh Circuit's ruling reopens a front Binance's counsel had reasonably expected to be closed.
For the rest of the industry, the ruling is a warning about how far arbitration clauses actually reach. If a court will not enforce them against non-customers whose stolen assets pass through your platform, then every centralised venue that has ever processed a laundered transaction is potentially in the same position. The industry standard has been that arbitration handles almost everything short of criminal charges. That standard just got a lot narrower.
The case now returns to the Southern District of Florida for litigation on the merits. Binance has not commented publicly on the appellate ruling.
