Raanan v. Binance Holdings Limited

Background

Plaintiffs are United States citizens, or relatives of United States citizens, who were killed, injured, or kidnapped during terrorist attacks committed by Hamas and Palestinian Islamic Jihad in Israel beginning October 7, 2023. They sued Binance Holdings Limited, described as a global cryptocurrency exchange, and Changpeng Zhao, its founder and former chief executive officer. The plaintiffs brought claims under the Anti-Terrorism Act and alleged that the defendants knowingly provided a mechanism that allowed Hamas and other terrorist groups to raise funds and conduct transactions supporting terrorist activities.

The plaintiffs alleged that the court could exercise personal jurisdiction—the court’s authority over a defendant—under New York’s long-arm statute because their claims arose from Binance’s conduct and operations in New York. They pointed to alleged New York-based activities by several Binance market makers. They similarly alleged that Zhao supervised and controlled conduct that subjected Binance to jurisdiction in New York. In the alternative, they relied on Federal Rule of Civil Procedure 4(k)(2), which can establish jurisdiction for certain federal-law claims when a defendant is not subject to jurisdiction in any state and federal jurisdiction is consistent with the Constitution and federal law.

Pending dismissal motion and discovery request

Binance and Zhao moved to dismiss the action under Rules 12(b)(6) and 12(b)(2). They argued that the plaintiffs had not stated a plausible Anti-Terrorism Act claim, that some plaintiffs lacked standing, and that the court lacked personal jurisdiction over the defendants. The plaintiffs opposed dismissal and stated that, if the court found their jurisdictional allegations inadequate, they would seek jurisdictional discovery.

After the dismissal motion was fully briefed, the plaintiffs filed the letter-motion addressed in this order. They asked for jurisdictional discovery if the court required additional details about the defendants’ alleged secret financial transactions. The proposed discovery would concern the defendants’ New York activities, activities from which the claims arose, and contacts with all fifty states. The plaintiffs did not provide further details about the planned discovery.

Analysis and ruling

The court held that the request was premature. The plaintiffs were not seeking discovery to oppose the pending dismissal motion; instead, they were concerned that they might need discovery later if the District Judge found their jurisdictional allegations insufficient but allowed them to amend. Because the need for discovery depended heavily on the outcome of the pending dismissal motion, the court concluded that it made little sense to decide the discovery issue at that time.

The order explains that if the District Judge denies both branches of the dismissal motion, the plaintiffs can proceed with ordinary discovery and will not need special permission for jurisdictional discovery. If the District Judge grants the failure-to-state-a-claim motion without allowing amendment, the case will end. Other possible outcomes could create different discovery questions.

Magistrate Judge Barbara Moses therefore denied, without prejudice, the plaintiffs’ letter-motion for jurisdictional discovery. The plaintiffs may renew the request after the dismissal motion is decided. Before renewing it, they must confer in good faith with the defendants in an effort to agree on whether jurisdictional discovery is needed and what its scope should be. The order did not decide the pending motion to dismiss or the merits of the Anti-Terrorism Act claims. The order was issued on referral from United States District Judge John G. Koeltl.