Hamas militants behind attack on Israel collected millions in cryptocurrencies

Hamas’ blitzkrieg attack on Israel last weekend raised questions about how the group financed the surprise operation. One answer: cryptocurrency.

In the year before the attacks, three militant groups – Hamas, Palestinian Islamic Jihad and its Lebanese ally Hezbollah – received large sums of money via cryptocurrencies, according to a review of warrants. Israeli government seizure and blockchain analysis reports.

Digital currency wallets that Israeli authorities linked to Palestinian Islamic Jihad received $93 million in cryptocurrency between August 2021 and June of this year, according to an analysis by Elliptic, a leading cryptocurrency researcher.

Wallets connected to Hamas received approximately $41 million over a similar period, according to a study by BitOK, another Tel Aviv-based crypto software and analytics company.

Palestinian Islamic Jihad militants joined Hamas on Saturday to attack Israel from the Gaza Strip, killing around 900 civilians and kidnapping at least a hundred others. At least 700 Palestinians have been killed since Israel responded with a wave of attacks on Gaza.

Hamas’ military wing, the Izz ad-Din al-Qassam Brigades, did not respond to a request for comment on the groups’ use of cryptocurrencies. Neither Palestinian Islamic Jihad nor Hezbollah could be reached for comment.

All three groups have been declared foreign terrorist organizations by the United States government and are subject to Treasury Department sanctions, limiting their access to the international banking system. Anyone engaging in transactions with these entities is subject to criminal prosecution and sanctions.

The crypto transactions underscore the extent to which the United States and Israel have had difficulty cutting off these groups’ access to foreign funding, according to analysts and former Western officials specializing in terrorism. Palestinian Islamic Jihad and Hamas, which holds power in Gaza, managed to amass weapons and other equipment under the nose of the Israeli government to launch the largest violation of its borders since the Yom Kippur War in 1973.

It could not be determined whether the cryptocurrencies they received were directly used to finance the assault. The amount of cryptocurrency seized by Israeli authorities could also not be determined. Investigators said that likely represented only a small percentage of the total amount of funds flowing through them.

Israeli police said Tuesday they have frozen even more cryptocurrency accounts used by Hamas to solicit donations on social media, as part of an ongoing effort to track down “cryptocurrency financial infrastructure used by terrorist entities to finance their activities.

Cryptocurrencies allow users to bypass banks by instantly transferring tokens between digital wallets, which are usually held on a cryptocurrency exchange. The US Treasury Department, in a report last year, noted that gaps in financial crime controls on these cryptocurrency exchanges could allow terrorist groups to abuse them, noting that the Islamic State and Al-Qaeda had also received donations in cryptocurrencies.

Following a June operation to seize cryptocurrencies belonging to Hezbollah, Israeli Defense Minister Yoav Gallant said the use of digital currencies was making the task of stopping the financing of terrorism increasingly complex.

“It’s not an easy task,” Gallant said.

In an order the following month targeting Palestinian Islamic Jihad wallets, Israel’s National Counterterrorism Finance Bureau also requested the seizure of any cryptocurrency stored in 67 customer accounts on Binance, the largest crypto exchange -currency in the world. Orders earlier this year from the Bureau against Hamas and Hezbollah also sought to seize funds from Binance. The U.S. Department of Justice conducted a thorough investigation into the company’s anti-money laundering controls, the Journal reported.

A Binance spokesperson said the exchange actively collaborates with law enforcement agencies, including those in Israel, to combat terrorist financing.

“Over the past few days, our team has worked around the clock to support ongoing efforts,” the spokesperson said. Israeli police said on Tuesday that the next account cancellations were carried out with the help of Binance.

Researchers who study Hamas financing say cryptocurrency remains one of the tools the group uses to raise funds, including importing cash into Gaza from Egypt. The United States maintains that Iran has long been the group’s main benefactor, estimating Tehran’s regular funding at around $100 million a year.

“Cryptocurrencies are another string to their bow,” said Joby Carpenter, a specialist in cryptocurrencies and illicit finance at ACAMS, an industry group for financial crime enforcement professionals.

Hamas has publicly sought to raise funds in crypto since at least 2019, when the al-Qassam Brigades began asking followers on its Telegram channel to donate bitcoins. “The reality of jihad is the expenditure of effort and energy, and money is the backbone of war,” the group wrote in a message, attaching the address of a wallet that received about $30,000 worth of bitcoins that year.

The group is one of the most sophisticated cryptocurrency users in the terrorist financing space, according to Ari Redbord, a former senior Treasury official who is now head of global policy at TRM Labs, a blockchain intelligence firm who follows the group.

Hamas stopped publishing its donation addresses to protect donor anonymity after Israeli and American researchers tracked transactions on blockchain, the public ledgers that aggregate data on all digital currency transactions.

Hamas has since turned to payment processors that generate crypto addresses and help hide its real cryptocurrency wallet, embedding links to these processors on the fundraising pages of its websites, Redbord explained .

The al-Qassam Brigades announced in April that it would stop receiving donations via Bitcoin and asked its supporters to contribute in other ways. This was “out of concern for the security of donors,” the group said on Telegram, citing a “redoubled hostile effort against all those who attempt to support the resistance through this currency.”

Hamas and Palestinian Islamic Jihad had already amassed millions of dollars in cryptocurrency, according to seizure warrants.

Elliptic’s analysis indicated that the groups were not only raising funds through cryptocurrencies, but also using them to move funds within their organizations. The London-based research firm found that the different groups also moved funds between their wallets, with Palestinian Islamic Jihad having sent more than $12 million in crypto to Hezbollah since 2021.

For transactions, they mainly used the “Tether Stablecoin”, which is pegged to the US dollar, thus avoiding the volatility that affects other tokens. When asked about the use of its token, Tether said it remains committed to deterring terrorist involvement, including by freezing associated wallets. The company has worked closely with law enforcement around the world to restrict illicit activity, Tether said.

Using cryptocurrency is “much easier than smuggling cash across the Egyptian border,” said Matthew Price, a former IRS investigator who now runs Elliptic’s business in conjunction with the police.