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On October 10, the Israeli government announced that police have frozen hundreds of cryptocurrency accounts linked to the terrorist organization Hamas.
The move was part of the Israeli government’s efforts to reduce Hamas’ financial support networks following the large-scale terrorist attack it carried out in Israel on October 7, which prompted Israeli reprisals in the Palestinian Gaza Strip.
The cryptocurrency freeze action is not the first that Israel has taken to disrupt Hamas’ cryptocurrency hoarding activity. The country has taken a number of previous actions ordering the freezing of funds held by Hamas in crypto wallets.
Indeed, among certain terrorist groups that have turned to cryptocurrencies to raise funds, Hamas has been among the most prolific, with wallets listed in the relevant Israeli seizure orders transacting millions of dollars in cryptocurrencies. However, the extent to which this activity directly relates to the financing of terrorism is not clear.
However, past efforts by law enforcement and private industry have been successful in detecting Hamas’s terrorist financing activity on the blockchain—using transparency cryptoassets to freeze and confiscate related assets. Earlier this year, the group even announced a halt to cryptocurrency fundraising activities, apparently recognizing that the ability to track funds on blockchain left it vulnerable to counter-terrorist financing efforts.
With the governments of the US, UK, EU and others condemning the Hamas attack on Israel, it is likely that wider efforts to reduce the use of cryptocurrencies to finance terrorism could become a priority on the policy agenda. The ability to detect and disrupt terrorist financing activities on the blockchain will be a key element of any response, should Hamas continue to use cryptocurrencies for fundraising.
Ultimately, the biggest obstacle to further Hamas fundraising through cryptocurrencies will be if stakeholders in the public and private sectors can effectively leverage the transparency of the blockchain to uncover and disrupt all associated fund flows.
Therefore, it is important for both private sector compliance teams and investigators in the law enforcement community to understand the historical picture of Hamas’ use of cryptocurrencies and the potential risks.
Hamas and crypto
Hamas’ use of cryptocurrencies first came to light in January 2019. That month, fundraising campaign launched the Al-Qassam Brigades (AQB) – the military wing of Hamas – designated as a terrorist organization by the US, EU and other jurisdictions. Like Elliptical analysis as revealed at the time, the campaign involved AQB soliciting donations from supporters via social media to fund the group’s militant activities.
Donors were instructed to send funds to Bitcoin addresses controlled by the group. The Bitcoin donations received by Hamas at the time were quite small – with only a few thousand dollars worth of donations over the next few months.
The group’s turn to crypto-assets may have represented an attempt to find alternative sources of fundraising, following previous efforts by the US and others to combat terrorist financing that targeted Hamas’ use of the banking and remittance sectors.
In August 2020, the US government announced that it dismantled the AQB website and seized the accounts the group used to receive crypto donations. Still, the group was able to revive a crypto fundraising campaign the following month – although donations remained relatively small, averaging just a few thousand dollars worth of Bitcoin donations per month.
All that changed, however, in the summer of 2021, when conflict broke out between Israel and Hamas. After the fighting began in May of that year, Elliptic’s Blockchain Analysis showed wallets suspected to be linked to Hamas receiving more than $73,000 in bitcoins in just a few days.
By July 2021, wallets identified by Israeli seizure warrants with potential ties to Hamas received more than $7.3 million worth of cryptocurrency. They held funds not only in Bitcoin, but also in the Tether stablecoin and other cryptoassets such as Ether, Tron (TRX) and Dogecoin. In the same month, Israel announced an operation to identify 84 crypto wallets controlled by the group and ordered the seizure of the funds in them.
After a further series of Israeli freeze orders, in April 2023 Hamas announced to its supporters that it no longer accepts crypto donations – acknowledging that the use of cryptocurrencies made it vulnerable to identification and asset seizure.
This is not surprising, as the public nature of the blockchain allows for tracking the flow of funds related to illegal activities, allowing law enforcement to successfully freeze crypto-assets held by terrorist groups.
Around the same time, crypto transactions received by Palestinian Islamic Jihad (PIJ) — another US-designated terrorist organization in the region that was the target of a separate Israeli freeze order targeting crypto wallets containing millions of dollars in cryptocurrencies — also plummetedsuggesting that groups involved in fueling the Palestinian-Israeli conflict have indeed abandoned cryptocurrencies as a fundraising tool.
Will Hamas’ crypto fundraising continue?
But in light of the current conflict, it’s reasonable to wonder whether Hamas – and other groups in the region, such as the PIJ – might return to crypto as a fundraising mechanism, especially in light of the success they’ve had soliciting crypto donations during previous periods of conflict .
There is certainly a very real possibility that they could. The announcement of Israel’s freezing order on October 10 suggests that the group continued to try to use crypto exchange accounts until today.
Previous Elliptic analysis also showed that crypto wallets suspected to be linked to Hamas, PIJ, and the Lebanon-based Hezbollah organization have occasionally transacted with each other, and that these groups have historically relied on the same cryptocurrency exchange services in an attempt to convert their crypto to fiat currencies. These groups’ previous experience in raising funds with cryptocurrencies may encourage them to do so if they become increasingly desperate for funding amid ongoing conflicts with Israel.
Identifying and disrupting the financing of terrorism in crypto
If Hamas – or other groups in the region – continue to use cryptocurrencies to finance the current conflict, it will be crucial to be aware of the risks.
It is worth noting that these groups did not only use cryptocurrencies as a means of fundraising, but also for internal transfers within the organization. Wallet addresses listed in seizure orders may also include money changers or other services, which may be indirectly or partially linked to terrorist financing.
However, compliance teams at crypto exchanges will need to be aware of the potential risk of handling funds linked to certain terrorist organizations – which requires access to blockchain analytics solutions that enable overview of crypto wallets and transactions.
Law enforcement investigators and analysts must also have access investigative solutions and possibilities which allow them to identify wallets associated with known terrorist organizations and to monitor associated fund flows for potential freeze and recovery actions.
Contact us to learn more about how Elliptic can help your organization address these challenges, and in the meantime, if you’re a law enforcement officer, consider downloading Elliptic’s latest report on the financing of terrorism through cryptocurrencies.
