Crypto research institutes uncover the truth about Hamas cryptocurrency fundraising, and the reality is minimal

Written by Elliptic

Compiled by Felix, PANews

According to an analysis by Elliptic, Hamas’s affiliate, Palestinian Islamic Jihad, raised “as much as $93 million in cryptocurrency” between August 2021 and June this year, according to an analysis by Elliptic.

Based on the matter, lawmakers, led by Senator Elizabeth Warren of Massachusetts and Republican Senator Roger Marshall of Kansas, sent a letter to the Biden administration expressing their “grave concerns” and asking the Biden administration to “provide more details on its plans to prevent the use of cryptocurrencies to finance terrorism.”

But Elliptic said in an Oct. 25 article that the data provided by Elliptic and others was misinterpreted and there was no evidence that crypto fundraising had raised funds close to that number. The Wall Street Journal, Senator Elizabeth Warren or Roger Marshall’s offices did not respond to this claim. But one of the authors of the story, Ian Talley, defended his story on the X platform. Talley cited an article published by Elliptic in July and seemed to suggest that Elliptic’s retraction of its earlier conclusion was due to pressure from the crypto community.

But it’s not just Elliptic who has questioned this data, as a recent article by cryptocurrency research firm Chainalysis also questioned the claim that Hamas raised millions of dollars in cryptocurrency. (Read: Blockchain analytics firm Chainalysis: The role of cryptocurrencies in terrorist financing may be overestimated)

Where did the data cited in the Wall Street Journal report come from, how does Elliptic explain it, and what does it think of the terrorist group’s crypto fundraising campaign? This article takes you through Elliptic’s response.

The following is the full text of Elliptic’s response:

The terrorist events of 7 October have once again focused attention on how terrorist 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 traceability of crypto assets means that the amount raised is still small compared to other funding sources.

Hamas began donating through Bitcoin in 2019, with donation activity peaking during violence in the region in May 2021. However, in April 2023, Hamas suspended all crypto fundraising activities for the public, citing “concerns for the safety of donors and avoiding any harm to them.” The group added that it sees “the intensification of hostilities to support the resistance movement through cryptocurrencies.” This followed action by U.S. law enforcement to confiscate crypto wallets used for money laundering, identify donors, and shut down fundraising websites. In 2021, Israel’s National Counter-Terrorism Financing Agency (NBCTF) began issuing seizure orders against Hamas-linked crypto wallets and working with exchanges to freeze accounts.

This illustrates the weakness of cryptocurrencies as a tool for terrorist fundraising. The transparency of blockchain allows illicit funds to be traced and, in some cases, linked to real identities. In addition, crypto users often use centralized services such as exchanges or stablecoins. These services respond to law enforcement’s requests to freeze funds related to illegal activities or act autonomously based on blockchain analysis.

Since the October 7 Hamas attack, the most prominent cryptocurrency public fundraising campaign has been launched by the pro-Hamas news agency “Gaza Now”. However, only $21,000 has been given away since October 7, and most of the funds have been frozen (preventing Gaza Now from using the funds) thanks to the efforts of crypto businesses and researchers. On October 9, Gaza Now sent about $2,000 in donated cryptocurrency to the exchange, presumably to cash out, but was quickly frozen by the exchange. In addition, about $9,000 in stablecoin donations were frozen by Tether.

In contrast, crypto fundraising for humanitarian causes in Israel is booming. For example, as of October 19, Israel Crypto Aid has received more than $185,000 in crypto donations to help refugees.

Over the past two weeks, politicians and journalists have described public fundraising of cryptocurrencies as an important source of funding for Hamas and other terrorist groups, but this claim is simply not supported by data. The terrorist group’s overt crypto fundraising campaign has not received significant donations compared to other sources of funding.

On October 10, the Wall Street Journal published an article titled “Hamas militants behind Israeli attack raise millions of dollars through cryptocurrency.” In an October 17 letter to the White House and the U.S. Treasury, more than 100 U.S. lawmakers cited the report, stating: “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 cryptocurrencies to evade U.S. sanctions and fund 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 cryptocurrency financing has raised funds close to this figure, and the data provided by Elliptic and others has been misunderstood. Elliptic has spoken with representatives of the lead signatory, Sen. Warren, and the author of that Wall Street Journal article to clarify this.

In July, Israel’s National Counter-Terrorism Financing Agency (NBCTF) issued a seizure order for crypto wallets linked to the terrorist organization Palestinian Islamic Jihad (PIJ). An analysis of the wallets seized by NBCTF revealed that the wallets received transactions totaling just over $93 million between 2020 and 2023. As Elliptic makes clear in her research, this in no way means that PIJ “raised” the funds, or that they all belonged to PIJ. It is unclear how much of the funds received by these wallets directly belongs to PIJ or other terrorism. Some of the wallets listed by NBCTF are likely to belong to smaller service providers such as brokers used by PIJ.

This is not to diminish the role of these service providers. The small cryptocurrency brokers used by Hamas and other terrorist organizations are themselves defined as terrorist organizations because they play a key role in financing these organizations. There is still a lot of work to be done to understand other ways in which terrorist groups exploit crypto assets, such as for purchasing support infrastructure.

Elliptic’s top priority is to prevent the illegal use of crypto assets, and for more than a decade, Elliptic has provided tools that allow clients to identify and freeze these funds. Terrorist groups do use crypto assets for public fundraising, but the amounts involved are small compared to other sources of funding. Whenever approaching such a delicate and sensitive topic, a careful and detailed understanding of blockchain analysis is required, and the person using these insights should provide the full context of the analysis.

Read: Hamas began using cryptocurrency fundraising four years ago, and terror websites have been secretly controlled by the United States