Hamas clarifies record of cryptocurrency crowdfunding

Source: Elliptic; Compiled: Pine Snow, Golden Finance

• There is no evidence to support the claim that Hamas has received a large number of cryptocurrency donations.
• When using blockchain analytics insights to draw conclusions, a thorough understanding of blockchain analytics and an understanding of the context and context of the analysis are required.
• Elliptic has partnered with The Wall Street Journal to correct Hamas’s misconceptions about cryptocurrency fundraising.
• In addition, we have been in discussions with Senator Warren’s office to ensure that all parties involved properly recognize the complexities and nuances of analyzing these wallets.

The events of 7 October have once again focused attention on how organizations such as Hamas are raising funds for their operations. Over the past few years, Hamas has begun experimenting with cryptocurrencies as a means of crowdfunding to the public through social media. However, the unique traceability of these assets means that the amount raised remains small compared to other sources of funding.

Hamas first began soliciting Bitcoin donations in 2019, culminating in the outbreak of violence in the region in May 2021. However, in April 2023, Hamas suspended all cryptocurrency fundraising activities for the public, citing “fears for the safety of donors and avoiding any harm to them.” The group added that “hostilities against anyone who tries to support the resistance movement through this cryptocurrency are intensifying.” Previously, U.S. law enforcement seized crypto wallets used to launder money, identified donors and shut down fundraising websites. Israel’s National Counter-Terrorism Financing Agency (NBCTF) began issuing seizure orders for Hamas-linked crypto wallets in 2021 and worked with exchanges to freeze the accounts they use.

This illustrates the weakness of cryptocurrencies as fundraising tools. The transparency of blockchain allows illicit funds to be traced and, in some cases, linked to real-world identities. In addition, users of cryptocurrencies often use centralized services such as exchanges or stablecoins. These services respond to law enforcement’s request to freeze funds related to illegal activities or do so on their own initiative based on the results of blockchain analysis.

Since October 7, the most famous public crypto fundraiser was launched by pro-Hamas news agency Gaza Now. However, only $21,000 in cryptocurrency has been donated since October 7, and much of it has been frozen thanks to the efforts of cryptocurrency businesses and researchers — preventing Gaza Now from using the funds. On October 9, Gaza Now sent around $2,000 in cryptocurrency donations to an exchange, possibly hoping to cash out, but was quickly frozen. In addition, stablecoin issuer Tether froze about $9,000 in stablecoin donations.

In contrast, crypto fundraising campaigns for humanitarian purposes in Israel are booming. For example, as of October 19, Crypto Aid Israel has received over $185,000 in cryptocurrency donations to support those affected by the incident.

Over the past two weeks, politicians and journalists have described public crypto fundraising as an important source of funding for Hamas and other organizations, but the data simply does not back this up. Relative to other funding sources, these organizations’ public crypto fundraising campaigns have yet to receive significant donations.

In an October 17 letter to the White House and the U.S. Treasury, more than a hundred U.S. lawmakers cited the report and noted: "[…] In the months leading up to the brutal and horrific attacks on Israel on October 7, Hamas and Palestinian Islamic Jihad (PIJ) raised millions of dollars through cryptocurrency — evading U.S. sanctions and funding their operations. In fact, from August 2021 to June this year, the two groups raised more than $130 million in cryptocurrency. ”

However, there is no evidence that crypto fundraising has raised close to this amount, and the data provided by Elliptic and others has been misunderstood. We have spoken with representatives of the lead signatory, Senator Warren, and the author of the Wall Street Journal article to clarify this.

In July, NBCTF issued a seizure order to seize crypto wallets linked to Palestinian Islamic Jihad (PIJ) active in the Gaza Strip. An Elliptic analysis of wallets seized by NBCTF revealed that these wallets received just over $93 million in transactions between 2020 and 2023. As we made clear in our research, this in no way means that PIJ “raised” all of these funds. It is not clear what percentage of the funds received by these wallets are directly attributable to PIJ or other organizations. Some of the wallets listed by NBCTF are likely to belong to smaller service providers, such as the brokers used by PIJ.

This is not to minimize the role of these service providers. Small cryptocurrency brokers themselves used by Hamas and others play a key role in funding these organizations. There is still a lot of work to be done to understand other ways in which these organizations leverage crypto assets, such as for purchasing supporting infrastructure.

At Elliptic, our priority is to prevent the illicit use of crypto assets, and for more than a decade, we have provided tools that allow clients to identify and freeze these funds. Many organizations do use crypto assets for public fundraising, but the amount involved is minimal compared to other funding sources. Whenever a subtle and sensitive topic such as this is touched upon, a careful understanding of blockchain analysis is required, and the full context of any analysis should be provided by the people using these insights.

Source: Golden Finance