Hamas raises bitcoin donations via US crypto exchange

Hamas leaders Ismail Haniyeh and Yahya Sinwar  photo Mohammed Sale, Reuters
Hamas leaders Ismail Haniyeh and Yahya Sinwar photo Mohammed Sale, Reuters

Israeli startup Whitestream detected two donations to Hamas through Coinbase, the largest cryptocurrencies trading platform in the US.

The bitcoin donations trail of Hamas is being exposed for the first time. Sources inform "Globes" that, according to a check late last week by Israeli blockchain intelligence startup Whitestream, Hamas has begun soliciting donations through Coinbase, the largest cryptocurrencies trading arena in the US. This activity by Hamas, which Israel and the US classify as a terrorist organization, apparently breaches the policy for using Coinbase's services, which are subject to the laws of the 42 countries in which it operates.

As "Globes" reported a week ago, Israel has allowed a $15 million monthly transfer from Qatar to the Gaza Strip in the framework of new understandings reached by Israel, Egypt, and Hamas. At the same time, Hamas, which controls the Gaza Strip, is not willing to settle for the millions of dollars it receives from Qatar, and is searching for more money to fund its activities. The Palestinian organization recently found a new way of soliciting donations using bitcoin. The idea is no surprise, given Israel's efforts to block ordinary channels for payments to Hamas.

In an announcement published last Tuesday via Telegram, Hamas military wing spokesperson Obaida said, "The Zionist enemy is fighting the Palestinian resistance through an attempt to cut off aid to the resistance by any means. Lovers of the resistance all over the world, however, are combating these Zionist attempts, and are looking for all possible means to aid the resistance." The Hamas spokesperson's announcement was covered extensively in the global media.

Two days later, last Thursday, for the first time, a bitcoin address was published for the official Telegram account of Hamas for transferring donations to the organization. Shortly afterwards, sources inform "Globes" that Whitestream, founded by entrepreneurs Itsik Levy and Uri Bornstein, succeeded in decoding the bitcoin transfers on the Hamas address and detecting the Palestinian organization's actions through the digital wallet of US company Coinbase. Whitestream's findings were forwarded to the security agencies.

Bitcoin donation from Khan Yunis

The software developed by Whitestream analyzes users' behavior on blockchain, the decentralized database on which bitcoin is based. Levy and Bornstein told "Globes" two week ago, "In exposing illegal activity, you could say that blockchain itself does most of the work. All activity on the network is registered and documented, so it can be read at a later stage." Levy said later, "We have been decoding blockchain transactions for a long time. According to our figures, only 2% of total bitcoin turnover involves the darknet or is related to terrorist or criminal activity."

After Hamas's military wing published a bitcoin address on Telegram on Thursday identified by Whitestream as the wallet address of Coinbase, the same Telegram channel published a second bitcoin address for collecting donations on Saturday, this time a digital wallet apparently unrelated to Coinbase. Levy explained to "Globes" today that according to a check by Whitestream, within two days of the publication of the first bitcoin address, two relatively small bitcoin donations addresses were published amounting to only $2,500.

Whitestream discovered that one of the bitcoin donations transferred to Hamas's Coinbase wallet was sent on Thursday from a "Buy Cash" bitcoin trader in Khan Yunis in the Gaza Strip. Other bitcoin donations were sent to the Palestinian organization from wallets connected to Chinese cryptocurrencies exchange Binance and Russian cryptocurrencies exchange Vilkov, and from a wallet of another Coinbase account. Whitestream's check also revealed that bitcoin donations were sent late last week from Hamas's coinbase wallet to two bitcoin wallets: one belonging to CoinPayments, a company registered in the Cayman Islands, and one belonging to Binance.

The second Hamas bitcoin address has so far received donations from wallets of US trading platforms Bittrex and Coinbase, from Binance and Vilkov wallets, and from the coinMixer.io mixing service. Mixing technology mixes different addresses of digital currencies, thereby making it difficult to identify their users. Levy told "Globes" that the Hamas Coinbase wallet may have been blocked, and another wallet opened for collecting donations. The Whitestream team will continue monitoring incoming and outgoing transactions on Hamas's bitcoin addresses in the near future.

Coinbase, whose main offices are in San Francisco, provides trading and money-changing services for digital currencies, together with wallet software for holding digital currencies. In addition to the US and Canada, the company's services are also available in Australia, Singapore, and 38 European countries, but are unavailable in the Palestinian Authority, the Gaza Strip, and Israel. Coinbase, founded in 2012, benefited from the hype in the global cryptocurrencies market in 2017, when the company's revenue reportedly amounted to $1 billion.

Coinbase's usage policy, as posted on its website, states, "Before the proceeds from digital currencies from the user's digital wallet are redeemed, we are likely to conduct checks in order to prevent fraud, money laundering, financing of terrorism, and other financial crimes. This could prevent or delay your withdrawal of the digital currencies." As of now, "Globes" does not know whether Coinbase took any action against Hamas's use of its services, as exposed by Whitestream.

Bitcoin price down 10% in January

Bitcoin (BTC), which soared to a record price of $20,000 in December 2017, traded today at an average price of $3,480, following a 10% slide in January. Bitcoin's price plummeted 73% in 2018.

The digital currencies, headed by bitcoin, are based on blockchain technology. They have been frequently accused in recent years of being a means of money laundering and terrorist financing. Over the past year, however, significant developments have occurred in the supervisory and enforcement measures taken against illegal activity in digital currencies.

Last November, for the first time ever, the Office of Foreign Assets Control (OFAC) in the US Department of the Treasury blacklisted bitcoin addresses. The OFAC reported that it had added two Iranian citizens to the list of US citizens with whom deals are banned. In a precedent-setting step, the OFAC included the two Iranians' bitcoin addresses in their details. The two Iranians were accused of converting over 6,000 bitcoin into Iranian rials worth millions of dollars for operators of the SamSam ransomware, which has attacked hundreds of businesses and organizations in recent years, including large private and governmental entities. The OFAC asserts that they used over 40 cryptocurrencies exchanges to transfer the money, which was eventually deposited in Iranian banks.

A study by the Herzliya Interdisciplinary Center in early 2018 reported several cases of raising donations in cryptocurrencies to finance the activity of Islamic terrorist organizations. Among other things, 15 bitcoin transfers from the US and Europe totaling tens to hundreds of millions of dollars to organizations in the Middle East and Asia were listed, including an arm of ISIS operating in the Gaza Strip.

Published by Globes, Israel business news - en.globes.co.il - on February 3, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Hamas leaders Ismail Haniyeh and Yahya Sinwar  photo Mohammed Sale, Reuters
Hamas leaders Ismail Haniyeh and Yahya Sinwar photo Mohammed Sale, Reuters
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