Israel took aim at Hamas’ digital cash flow last week, seizing dozens of digital wallets associated with the Islamist group ruling the Gaza Strip.
Hamas, which is blacklisted as a terror group by the United States and the European Union, has long used digital currencies to circumnavigate sanctions. The group uses cryptocurrencies – which are hard to trace and purportedly offer anonymity online – to raise funds and transfer them across borders using a system of digital wallets.
Last Wednesday, Israel’s Defense Ministry’s National Bureau for Counter Terror Financing announced it had seized a number of digital wallets linked to Hamas at the end of June, in what is the first and most aggressive action against the terror group’s cryptocurrency efforts.
During the last round of fighting between Israel and Hamas, the latter launched a massive fundraising drive using cryptocurrencies. According to a Wall Street Journal report from June, “There was definitely a spike” in cryptocurrency donations to the organization, an official from the group who spoke to the paper on condition of anonymity was quoted as saying. “Some of the money gets used for military purposes to defend the basic rights of the Palestinians,” they added, noting that the drive was linked to Hamas’ military wing, Iz al-Din al-Qassam.
Among the 70-plus accounts seized on June 30 were those that included bitcoin – the most common and best-known digital currency – but also others including Ethereum and even Dogecoin, a currency that drew media attention after Elon Musk invested in it.
Defense Minister Benny Gantz ordered security forces to seize the accounts after a joint operation with a cryptocurrency tracking firm “uncovered a web of electronic wallets” used by Hamas to raise funds, the ministry said last week when announcing the seizure.
The news comes amid a wider bid by Western states to crack down on digital wallets, long favored by cybercriminals for laundering funds accrued via digital crimes such as ransomware attacks due to their supposed anonymity.
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“The intelligence, technological and legal tools that enable us to get our hands on terrorists’ money around the world constitute an operational breakthrough,” the AP quoted Gantz as saying about the operation.
Recently, U.S. regulators have suggested regulating digital wallets so they could no longer be anonymous, and have even suggested holding companies accountable if digital funds they pay out to criminals as part of ransomware attacks are found to be used for illegal purposes.
Cryptocurrency exchanges have also come under fire for their role in helping conceal complex digital currency-laundering operations. However, many of the exchanges, which conduct the critical operation of turning cryptocurrency into dollars or other widely accepted currencies, are in countries outside the reach of U.S. regulators.
A small cottage industry has emerged in Israel and abroad of firms tracking such transfers and untangling the complex trails used by terrorists and cybercriminals to hide their funds. For instance, last year Israeli firm Whitestream successfully tracked the movement of ransom fees paid out to a group of hackers targeting Israeli firms. Following the payments across the so-called “blockchain” (basically, a digital ledger of transactions), they linked it to an Iranian cryptocurrency exchange and thus confirmed the hackers’ identities.
The operation to take down Hamas’ digital funds was done together with a firm called Chainalysis. The firm helped reveal “how funds moved to exchange addresses from Hamas donation addresses, often passing first through intermediary wallets, high-risk cryptocurrency exchanges, and money services businesses,” Chainalysis wrote in its report.
They noted the role of two exchanges located outside of the U.S. – one in Syria and another in the Mideast region – in funneling the funds to the group.
Chainalysis stated: “Two addresses named in the [Israeli] announcement received funds from addresses associated with the Idlib office of BitcoinTransfer, a Syrian cryptocurrency exchange connected to previous terrorism financing cases. Another received funds from a Middle East-based MSB [money service business] that had previously received funds from the Ibn Taymiyya Media Center (ITMC), an organization that has also been associated with terrorism financing in the past.”
Noa Mashiach, who heads Israel’s bitcoin association, said that the crackdown on Hamas proves that despite common misconceptions, digital coinage is actually a strong currency that can be regulated and trusted.
“Criminals who make use of this financial system will learn the hard way that the blockchain ledger will reveal them and actually allow authorities to move against them.”
Last year, the U.S. Justice Department said it had seized millions of dollars from cryptocurrency accounts that militant groups, including Al-Qaida and the Islamic State group, relied on to finance their organizations and terror plots.
The department said it had confiscated about $2 million, in addition to more than 300 cryptocurrency accounts, four websites and four Facebook pages related to the schemes.
One element of the U.S. investigation targeted Hamas’ military wing. Law enforcement officials seized more than 150 cryptocurrency accounts that they said laundered funds to and from accounts operated by the group.
AP contributed background to this report.