Paxful co-founder Ray Youssef called Binance "genocidal and racist", and Binance faced heavy losses due to massive withdrawal of users

On August 26, leading cryptocurrency exchange Binance was accused of freezing the crypto assets of Palestinian users at the request of Israeli authorities.

Ray Youssef, co-founder of Paxful and CEO of Noones P2P platform, highlighted the allegations, which raise concerns about the independence of cryptocurrency exchanges and user privacy.

Youssef claimed that Binance "seized all Palestinian funds" at the request of the Israeli Defense Forces (IDF). According to Youssef, Binance refused to return the seized funds and rejected appeals from affected users. Neither Binance nor Israeli officials have yet commented on the allegations.

The crux of the matter is that the cryptocurrency wallet received funds from an organization, Dubai Exchange Company, which is listed as a terrorist organization by Israel. The Gaza-based organization was designated as such by Israeli authorities in 2022.

Binance reportedly defended its actions based on a November 2023 letter from Paul Landes, Israel's National Anti-Terrorism Financing Authority. The letter cited anti-terrorism laws to support the "temporary seizure of property of declared terrorist organizations," which includes frozen cryptocurrency funds.

Gaza Binance users were banned and a large number of visitors withdrew funds from the Binance platform to express their protest and dissatisfaction

Ray Youssef said in response, "In addition to being an accomplice to genocide, this is murder! This is the true story of Binance being taken over and attacking Palestine and Africa! Genocide and racism are disgusting!"

Within a day of the news, Binance lost funds worth 44,808 Bitcoins, which were withdrawn from its website. For all we know, more people may follow suit.

Binance has cooperated with Israeli authorities in the past, including efforts to seize accounts associated with Hamas and the Islamic State as part of anti-terrorism measures.

This has led some to believe that centralized exchanges like Binance may increasingly act as extensions of the government rather than safe custodians of digital assets.