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US Government Seize Bitcoin Terrorism Funding for Islamic State and Al-Qaeda

The US Justice Department has revealed that it has seized Bitcoin and cryptocurrency worth millions of dollars intended to fund the activities of terror groups like the military arm of Hamas, the Islamic State, and Al-Qaeda. This breakthrough is the largest clampdown on online terrorist fundraising, according to The Washington Post.

300 cryptocurrency accounts scrutinized

Apart from the captured funds, the US officials also disclosed that they had attained court orders to get hold of 300 cryptocurrency accounts, four Facebook pages, and four websites linked to the alleged terror fundraising.

They also noted that Al-Qaeda groups mainly in Syria were to be financed using laundered Bitcoin. The funding organizations in question solicited Bitcoin donations using social media platforms like Telegram.

According to the US government’s court filing, the appeal for donations was at times disguised as charity work if the message didn’t sink in that the money was to be used to purchase weapons.

Quest for Bitcoin donations

The US authorities noted that they thoroughly investigated the military wing of Hamas called Al-Qassam Brigades after it posted a request for Bitcoin donations on its social media page as they were untraceable and could be channeled for violent causes. They were able to lay hold of 150 accounts linked to this fundraising effort.

Steven T. Mnuchin, the Treasury Secretary, noted:

“Terrorist networks have adapted to technology, conducting complex financial transactions in the digital world, including through cryptocurrencies.”

In another case, Murat Cakar was charged for being an orchestrator of the Islamic State. He was the mastermind of a coronavirus-related scam, which coerced victims that it was selling protective masks.

In May, blockchain analysis company Chainalysis indicated that ISIS was not hoarding $300 million Bitcoin war-chest. This revelation came in the wake of allegations that this terror group using crypto platforms to bypass financial security measures and conceal donations.

Democrats Request Trump Administration Briefing on Enormous Seizure of Cryptocurrency Terrorism Funding

House Democrats Reps. Josh Gottheimer (D-N.J.) and Emanuel Cleaver (D-Mo.) more details from the White House on the recent seizure of cryptocurrency funding that was bound for Hamas, al-Qaeda and Islamic State terrorist groups.

According to a report from The Hill on Aug 25, Cleaver, who is the chairman of the House Financial Services Subcommittee on National Security, International Development, and Monetary Policy, and Gottheimer, a member of the subcommittee—have requested that Treasury Secretary Steven Mnuchin and Attorney General William Barr offer a briefing to the subcommittee on the seizure operation.

Cleaver and Gottheimer wrote in their request to the Trump Administration:

“It is vital that Members of the Subcommittee on National Security, International Development and Monetary Policy receive a briefing, at the appropriate classification level, on this action, the largest ever seizure of online terrorist financing, from the Department of Justice, the Department of the Treasury on this investigation.”

Gottheimer was part of the House Bipartisan group that, in 2019, pressured Twitter to remove several accounts tied to Hamas and Hezbollah, which Twitter did in the end.

On Tuesday Gottheimer said, “foreign terrorist organizations, including ISIS and al Qaeda, are constantly evolving and using tactics to threaten our way of life and we must continue to stay one step ahead.”

Terrorist Bitcoin and Crypto Seizure

According to the US Justice Department, two weeks ago millions of dollars in Bitcoin and cryptocurrency that was intended to fund the activities of terror groups like the military arm of Hamas, the Islamic State, and Al-Qaeda were seized by law enforcement. This breakthrough is the largest clampdown on online crypto terrorist fundraising in history.

According to the US government’s court filing, the appeal for donations was at times disguised as charity work, including scams for COVID-19 relief work.

Coinbase Legal Chief Urges Swift US Crypto Legislation Amid Israel-Hamas Tensions

Paul Grewal, the Chief Legal Officer at Coinbase, voiced a strong stance against funding malicious entities through cryptocurrencies in a series of tweets on October 11, 2023. His tweets come amidst escalating geopolitical tensions involving Israel and the terrorist organization, Hamas. Grewal labelled the situation as “evil,” emphasizing that no funds should be directed towards supporting Hamas or similar organizations, irrespective of the form of assets—be it fiat currency, gold, or cryptocurrency.

Grewal underscored Coinbase’s rigorous efforts to mitigate the misuse of cryptocurrencies on its platform. The measures include Know Your Customer (KYC) checks, sanctions screening, Suspicious Activity Report (SAR) reporting, and fostering strong partnerships with law enforcement agencies. He elucidated that these steps are integral to ensuring that cryptocurrencies are not leveraged for illicit purposes on Coinbase’s platform.

Further, Grewal advocated for the swift enactment of sensible cryptocurrency legislation within the United States. He opined that fostering the cryptocurrency industry in nations adhering to the rule of law is crucial. This, according to Grewal, would prevent the industry from veering into regions where human rights and public safety are not prioritized.

The discourse triggered a ripple of responses from the crypto community, including remarks from Mike Alfred, who pointed out Binance’s late response to similar issues, and Sam Morrow, who expressed gratitude for Binance’s current involvement. Others questioned the implications of asset seizures on Coinbase, hinting at potential infringements on individual rights.

US Treasury Targets Hamas Financial Networks Post-Israel Attack

In a decisive response to the recent terrorist attack on Israel, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated ten individuals and entities linked to the Hamas terrorist organization. This action, aimed at crippling the financial structures supporting Hamas, encompasses individuals and operations not only in the Gaza Strip but extends to Sudan, Türkiye, Algeria, and Qatar.

Sanctions Detail

The sanctions zero in on various facets of Hamas’s financial network. Among those designated are individuals managing a clandestine Hamas investment portfolio, a Qatar-based facilitator with close Iranian affiliations, a senior Hamas commander, and a Gaza-based virtual currency exchange along with its operator. These sanctions build on previous actions dating back to May 2022, targeting officials and companies entangled in Hamas’s concealed global investment portfolio. The current designations are emblematic of a broader US strategy to dismantle the revenue streams fueling Hamas’s activities in the West Bank, Gaza, and beyond, closely coordinated with regional allies.

Hamas’s global financial operations, veiled as legitimate businesses, have purportedly amassed revenue in hundreds of millions, with investments spanning several countries including Sudan, Algeria, Türkiye, and the United Arab Emirates. The United States seeks to expose and freeze these assets to curtail Hamas’s ability to finance its operations.

Key Individuals and Entities

Highlighted among those sanctioned are Musa Muhammad Salim Dudin, a West Bank-based Hamas official, and Abdelbasit Hamza Elhassan Mohamed Khair, a Sudan-based financier who managed several companies within Hamas’s investment portfolio. In Türkiye and Algeria, Amer Kamal Sharif Alshawa, Ahmed Sadu Jahleb, Aiman Ahmad Al-Duwaik, and Walid Mohammed Mustafa Jadallah were identified as part of Hamas’s investment network, with various roles in supporting the terrorist organization’s financial infrastructure.

Muhammad Ahmad ‘Abd Al-Dayim Nasrallah and Ayman Nofal, based in Qatar and Gaza respectively, were also designated for their significant roles within Hamas. The actions further extended to Buy Cash Money and Money Transfer Company, a Gaza-based virtual currency exchange, and its owner Ahmed M. M. Alaqad, for their material support to Hamas.

Virtual Currency Concerns

OFAC’s action underscores the evolving challenge posed by virtual currencies in financing terrorism. The seizure of virtual currency wallets linked to Hamas in 2021 by Israel’s National Bureau for Counter Terrorist Financing serves as a precursor to the concerns echoed in these sanctions. The designation of Buy Cash, involved in virtual currency transactions including Bitcoin, highlights a nuanced dimension of terror financing that demands international attention and action.

Sanctions Implications

The ramifications of these sanctions are extensive. They mandate the freezing of all property and interests in the US or under US persons’ control belonging to the designated individuals and entities. Additionally, they underscore the risks financial institutions and other entities might face if found engaging in transactions with the designated persons, thereby reinforcing the robustness and the dynamic enforcement landscape of the US sanctions regime.

FinCEN Issues Alert to Counter Financing to Hamas and its Terrorist Activities

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an alert on October 20, 2023, aimed at assisting financial institutions in identifying funding streams that support the terrorist organization Hamas. This move comes after a devastating attack on Israel on October 7, 2023, orchestrated by Hamas, which resulted in significant casualties, including U.S. citizens.

Hamas employs a multifaceted approach to raise funds for its operations. According to the U.S. Department of the Treasury, the organization receives support from Iran, estimated at times to be as high as $300 million per year. Additionally, Hamas utilizes private donations, a global portfolio of investments, and diverts aid from legitimate charities. They also control border crossings and avenues of commerce, engage in racketeering, and run extortionary practices around local populations. Notably, Hamas has been involved in fundraising campaigns that use both fiat and virtual currencies.

FinCEN has outlined specific red flag indicators to help financial institutions detect, prevent, and report potential suspicious activity related to Hamas’s terrorist financing. These indicators include transactions with OFAC-designated entities, transactions indicating support for terrorist campaigns, and transactions involving high-risk jurisdictions tied to Hamas activity. Financial institutions are urged to include the key term “FIN-2023-TFHAMAS” in Suspicious Activity Reports (SAR) to indicate a connection with the alert.

As part of a whole-of-government response, the Treasury is engaging with foreign counterparts to deny Hamas the ability to raise and use funds worldwide. Numerous Hamas members and financial facilitators have been designated by the Office of Foreign Assets Control (OFAC) in various countries, including Sudan, Türkiye, Algeria, and Qatar.

FinCEN has also expressed concerns over the use of virtual currencies and online platforms in financing terrorist activities. The alert specifically mentions that Hamas has been involved in fundraising campaigns involving virtual currency and fictitious charities. Financial institutions are advised to be vigilant in monitoring transactions that involve virtual currencies, especially those that originate from or are directed to high-risk jurisdictions.

Given the evolving nature of terrorist financing methods, FinCEN is continuously updating its guidelines and working closely with international partners to curb the flow of funds to terrorist organizations. Financial institutions are advised to stay updated on FinCEN’s alerts and guidelines to ensure compliance and contribute to national security efforts.

Elliptic Debunks Claims of Substantial Crypto Funding to Hamas

On October 25, 2023, blockchain analytics firm Elliptic released a statement clarifying misconceptions surrounding the extent of cryptocurrency funding received by Hamas. The firm emphasized the absence of substantial evidence supporting claims that Hamas has garnered significant crypto donations. This follows heightened scrutiny on cryptocurrency’s role in financing terrorism, especially in the wake of the tragic incidents on October 7, orchestrated by Hamas.

Elliptic’s clarification comes amidst a wave of reports suggesting that cryptocurrencies have become a substantial financing tool for Hamas. On October 10, a narrative was fueled by an article in the Wall Street Journal, titled “Hamas Militants Behind Israel Attack Raised Millions in Crypto”. This narrative gained traction when, on October 17, over a hundred US lawmakers referenced the article in a letter to the White House and the U.S. Department of the Treasury, asserting that Hamas and Palestinian Islamic Jihad (PIJ) raised over $130 million in cryptocurrencies between August 2021 and June 2023, a claim Elliptic argues lacks evidentiary backing.

Analysis indicates that public crypto fundraising campaigns by Hamas have not received substantial donations. The disclosure reveals that Gaza Now, a pro-Hamas news outlet, only received $21,000 in cryptocurrency donations since October 7, with $2,000 being sent to an exchange on October 9, and around $9,000 in stablecoin donations being frozen by Tether. This contrasts starkly with the reported $130 million figure cited by lawmakers.

Historically, Hamas sought Bitcoin donations starting in 2019, peaking during the May 2021 regional violence outbreak. However, by April 2023, the group ceased public crypto fundraising, citing donor safety concerns. The halt followed US and Israeli law enforcement actions, including the issuance of seizure orders for Hamas-associated crypto wallets and collaboration with exchanges to freeze related accounts.

Further analysis by both Elliptic and Chainalysis, another blockchain forensics firm, underscores the exaggerated figures in media reports. For instance, one wallet purported to have received $82 million over seven and a half months had only $450,000 associated with terrorism, as per Chainalysis. The analysis reveals a significant misrepresentation of facts concerning the extent of cryptocurrency’s role in funding terrorism.

Notably, the scrutiny on Hamas’s crypto funding coincides with thriving crypto fundraising for humanitarian causes in Israel. As of October 19, Crypto Aid Israel amassed over $185,000 in cryptocurrency donations to aid those affected by the attacks, showcasing the potential positive impact of cryptocurrencies.

Elliptic stressed the importance of nuanced blockchain analysis to avoid misinformation, emphasizing its long-standing commitment to preventing crypto assets’ illicit use. The firm advocates for a balanced understanding and reporting on the multifaceted issues surrounding cryptocurrency and terrorism financing.

Japan Freezes Assets Linked to Hamas Funding

On October 31, the Japanese government announced the freezing of assets belonging to nine individuals and one cryptocurrency trading company accused of financially aiding the Palestinian militant group Hamas, as per Kyodo News. This action comes amidst an ongoing conflict between Israel and Hamas, with other nations like the United States taking similar steps to curb the financial streams that fuel Hamas’s activities.

The Japanese government’s decision targets entities purportedly involved in the financial support of Hamas, which is engaged in rocket attacks against Israel. Hirokazu Matsuno, Japan’s Defence Minister, during a press briefing, emphasized on continued evaluation of potential sanctions from a counterterrorism financing perspective.

The United States had previously enforced sanctions against individuals and entities associated with Hamas on October 18. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated ten individuals and entities, extending beyond the Gaza Strip to Sudan, Türkiye, Algeria, and Qatar. This action aimed at dismantling Hamas’s financial network, aligns with the broader international initiative to disrupt terrorist financing.

The involvement of a cryptocurrency trading company in this case sheds light on the growing global concern over digital financial platforms facilitating illicit financial flows, a matter that has been underscored by the US sanctions targeting a Gaza-based virtual currency exchange.

These actions by Japan and the US reflect a growing international consensus to tackle terrorism financing. The measures add a financial dimension to the efforts aimed at curbing militant activities in the Middle East, amidst the continuing conflict between Israel and Hamas.

U.S. Intensifies Sanctions on Hamas, Targeting Crypto Assets

Wally Adeyemo, the Deputy Treasury Secretary for the United States, made a recent announcement on further sanctions against Hamas, according to Reuters. These new measures are focused on Hamas’ usage of bitcoin assets. This comes as a direct retaliation to the assault carried out by the Palestinian terrorist organization against Israel a month ago. The purpose of the sanctions, which were coordinated with partners of the United States, is to cut off Hamas’s sources of revenue, especially those ones that include crypto assets.

Specifics of the Sanctions

The United States Treasury has implemented penalties on top Hamas leaders, a crypto exchange operating in Gaza, and people who have been related to Hamas’s financial support. This comprises two Hamas executives as well as six persons who manage the financial portfolio for Hamas across a variety of geographic areas. The sanctions are a part of an attempt to disrupt the income that the organization derives from a portfolio of companies that is worth hundreds of millions of dollars.

The Office of Foreign Assets Control (OFAC) under the United States Department of the Treasury especially targeted the cryptocurrency exchange known as “Buy Cash,” which was located in Gaza and is suspected of having aided in the funding of terrorist operations. In addition to that, Ahmed M. M. Alaqad, the primary operator of Buy Cash, was given a punishment. There is evidence to suggest that Buy Cash was involved in wealth transfers between al Qaeda affiliates and ISIS.

In addition, the action taken by the Treasury Department targeted people such as Musa Muhammad Salim Dudin and Abdelbasit Hamza Elhassan Mohamed Khair, who were reportedly involved in facilitating the movement of cash for Hamas. Other people who are subject to sanctions include Ahmed Sadu Jahleb, Amer Kamal Sharif Alshawa, Aiman Ahmad Al-Duwaik, and Walid Mohammed Mustafa Jadallah. All of these people are believed to have positions in organizations that are controlled by Hamas.

Those sanctioned include Hamas operatives Muhammad Ahmad ‘Abd Al-Dayim Nasrallah and Ayman Nofal, both of whom were recently slain in an Israeli attack.

The Situation

By soliciting donations in bitcoin, Hamas sought to get around restrictions imposed by the United States. However, this endeavor was unsuccessful as a result of the harsh steps that were taken by the United States Treasury to clamp down on operations of this kind. The government of Joe Biden, which is dedicated to imposing further expenses on Hamas and their funding, has placed an emphasis on the need for additional sanctions.

The dedication of the United States Treasury to thwarting the funding of terrorist organizations is reflected in the tightening of sanctions against Hamas, particularly in the field of virtual currencies. This action reflects the rising concern about the use of digital assets in terror funding as well as the proactive strategy taken by the United States government to combat this danger.

Circle Formally Refutes Allegations of Illicit Financing and Connections to Justin Sun

Circle, a leading issuer of stablecoins, has recently addressed and strongly refuted allegations regarding its involvement in illicit financing and alleged connections with Justin Sun, the founder of Tron. These claims, brought forward by the nonprofit watchdog organization, Campaign for Accountability (CfA), prompted Circle’s Chief Strategy Officer and Head of Public Policy, Dante Disparte, to write a formal response to U.S. Senators Elizabeth Warren and Sherrod Brown.

In the letter, Disparte emphatically denies any involvement of Circle in facilitating or financing activities related to Hamas or any other illicit actors. He highlights Circle’s unwavering commitment to combating illicit financial activities. Circle has been an active partner with regulators and law enforcement in the United States, Israel, and other jurisdictions, ensuring that their stablecoin, USDC, is not used for illicit activities. The company’s dedication to legal compliance was recently acknowledged by the U.S. Secret Service, recognizing Circle’s efforts in identifying fraud and assisting in fund recovery.

Addressing specific allegations, Disparte referred to an incident where the National Bureau for Counter Terror Financing of Israel identified digital wallets linked to the Palestinian Islamic Jihad (PIJ) with assets amounting to $93 million. A report by the blockchain firm Elliptic initially suggested that all assets in these wallets were used to finance PIJ, but this was later corrected. Public blockchain ledgers revealed that of the $93 million, only $160 in USDC was transferred among those wallets, and none of that amount originated from Circle. This example underscores Circle’s stance against the misrepresentation of its role in alleged illicit activities.

Furthermore, Circle clarified its relationship with Justin Sun, stating that it does not provide banking services to him or his associated entities, including the TRON Foundation or Huobi Global. Despite the absence of specific designations by the U.S. government, Circle terminated all accounts associated with Mr. Sun and his affiliated companies in February 2023.

Circle also emphasized its status as a highly regulated financial entity. It operates under the regulatory frameworks of multiple U.S. states and federal bodies, including the Ohio Department of Commerce Division of Financial Institutions and the New York Department of Financial Services. As a Money Services Business registered with FinCEN, Circle adheres to the Bank Secrecy Act, anti-money laundering laws, and other regulatory standards. This regulatory compliance is a cornerstone of Circle’s operations, reflecting its commitment to legal and ethical business practices.

In its advocacy for regulatory reforms, Circle has been a vocal proponent for a comprehensive federal framework governing stablecoins. The firm has actively participated in legislative processes, seeking to establish robust reserving, redemption, disclosure, liquidity, and operational risk management standards for stablecoin issuers. Circle’s CEO, Jeremy Allaire, has testified before Congress, advocating for standards that would elevate the safety and reliability of stablecoin issuers.

Circle’s response to the allegations made by the CfA is a strong affirmation of its dedication to regulatory compliance and ethical practices in the digital assets space. The company remains committed to collaborating with regulatory bodies to enhance the regulation of digital asset markets and to combat money laundering and terrorism financing effectively.

Joint Sanctions by U.S., UK, Australia Target Hamas's Crypto Financing Networks

To combat terrorism financing, the U.S., UK, and Australia have imposed a fifth round of sanctions on Hamas, specifically targeting its virtual currency transfer networks. This action, announced on January 22, 2024, marks a concerted effort by these nations to disrupt the financial mechanisms that support terrorist activities, particularly those facilitated by cryptocurrency.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) spearheaded this initiative, focusing on networks affiliated with Hamas in Gaza, including their owners and associates. These networks have been instrumental in channeling funds, including those from cryptocurrency transfers, from the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) to Hamas and the Palestinian Islamic Jihad (PIJ) in Gaza. This round of sanctions is part of a broader strategy that includes previous joint actions with the UK targeting Hamas leaders and financiers, as well as U.S. actions targeting sources of Hamas support and financing.

The sanctions specifically target the Shamlakh Network, with key individuals such as Gaza-based financial facilitator Zuhair Shamlakh playing a prominent role. Shamlakh has been involved in transferring substantial funds from Iran to Hamas, utilizing his companies for these transactions. These financial activities have been ongoing since at least 2017, with millions of dollars being transferred to support terrorist groups in Gaza.

The UK’s sanctions are aligned with those of the U.S., targeting key figures in Hamas and PIJ’s financial networks. British Foreign Secretary David Cameron emphasized the message that there is no hiding place for those financing terrorist activities. The sanctions include asset freezes and travel bans, aimed at disrupting the flow of funding from Iran to these terrorist groups. The UK is dedicated to working with international partners to tackle Iran’s destabilizing activities in the Middle East, including its support for militant groups.

In addition to the U.S. and UK, Australia has also joined in imposing sanctions on key Hamas officials and facilitators. This coordinated international effort reflects a unified stance against the financing of terrorism and the exploitation of cryptocurrency for such purposes.

These sanctions are significant as they highlight the increasing use of digital currencies by terrorist groups to fund their operations. The underground financial networks created by these groups exploit legitimate businesses to conceal the flow of terrorist funding. By targeting these networks, the U.S., UK, and Australia aim to undermine the financial infrastructure that supports Hamas’s terrorist activities.

The latest sanctions follow earlier ones imposed after the October 7 Hamas attack on Israel. This coordinated effort by the U.S., UK, and Australia demonstrates their commitment to disrupting the financial networks of terrorist groups and preventing them from accessing funding through modern financial mechanisms, including cryptocurrencies.