The National Student Union has received a NIS 800,000 contribution from a foundation controlled by Nochi Dankner's IDB Group, one of the conglomerates criticized for holding too much power in Israel's concentrated economy.

The National Student Union is headed by Itzik Shmuli, a leader of last summer's social protest, who has criticized a demonstration in central Tel Aviv that turned violent Saturday night.

Meanwhile, Shmuli's deputy has resigned from the union, irked by the cooperation with IDB. Sources have told Haaretz that part of the donation, for a project in Lod, has already been transferred via Koor Industries, an IDB company.

The project, called Re-Lod, offers scholarships to students who move to Lod and volunteer for community projects there. Shmuli himself declared at the beginning of this year that he would move to Lod.

According to minutes of a meeting of the National Student Union's leaders in January, Shmuli said the project's first phase would cost around NIS 300,000, and the whole project could cost up to NIS 40 million.

The contact between Shmuli and the IDB Group began six months ago, when the conglomerate agreed to support the project. Meanwhile, Shmuli has tried to get more business groups to get on board.

On Sunday, Shmuli's deputy Ofri Raviv resigned from the union due to "a loss of trust in the chairman." In his resignation letter, Raviv wrote that "the union is now being guided by personal considerations, mostly [Shmuli's] political future in a certain party."

Asked by Haaretz if the Lod project was a reason for his resignation, Raviv said he had problems with "the source of the funds, especially considering that the student union took part in the protest against IDB Group. It doesn't look good."

Shmuli, meanwhile, blasted the demonstration in Tel Aviv Saturday night.

"[Saturday] night's horror show, with its wave of destruction and violence, cannot be justified," he said.

Referring to the Lod project, Shmuli said that "after we establish a nonprofit organization, the matter of donors will be crystal clear .... As of yet, nobody has committed to anything."

Shmuli added that he can't understand how the project could be depicted in a negative light.

Rani Rahav, a spokesman for IDB Group, said that "as part of the group's community activities, we have been assisting the city of Lod since 2006 through several projects, including education projects."

Referring to Saturday's demonstration, Rahav called on the police to "crush the demonstrators." They were demonstrating after protest leader Daphni Leef had been violently arrested on Friday, protesting on Tel Aviv's Rothschild Boulevard.