Risk & Compliance

U.S. Busts Terror Groups’ Crypto Campaigns

Agents used blockchain analysis techniques to pierce the anonymity of bitcoin and Ether transactions related to Hamas and Al Qaeda.
Matthew HellerAugust 14, 2020

The U.S. government has announced it seized about $2 million in cryptocurrency from terrorist groups, using sophisticated blockchain analysis techniques to pierce the anonymity of bitcoin and Ether transactions.

Federal authorities also covertly operated a website to receive bitcoin donations as part of an investigation that resulted in the largest ever seizure of cryptocurrency assets related to terrorism financing.

Investigators infiltrated the financing operations of Al Qaeda and Hamas’s paramilitary arm, the Al Qassam Brigades, obtaining court orders to forfeit about 300 cryptocurrency wallets held by banklike institutions.

The government also said it dismantled a COVID-19 fraud scheme to raise money for ISIS by selling N95 face masks.

“Today’s actions deprive Hamas, Al Qaeda and ISIS of millions of dollars they solicited to buy weapons and train terrorists,” said John Demers, the assistant attorney general for the Justice Department’s National Security Division. “By raising cryptocurrency on social media, these terrorists tried to bring terrorist financing into the current age.”

Both bitcoin and Ether offer anonymity to users, with each transaction referenced in the blockchain ledger by a complex series of numbers and letters. According to the government, criminals have also looked for ways to “make their transactions even more anonymous.”

But in an affidavit, IRS Special Agent Jonathan Gebhart said analyzing the blockchain “can sometimes lead to the identification of both the owner of an address and any other accounts controlled by the same individual.”

For the investigations of Hamas and Al Qaeda, agents worked with blockchain analysis experts at Chainalysis, using software that looks for “clusters” of transactions to identify bitcoin possessed by the same individual.

In the case of an account beginning with 17QAW that was used to solicit donations to Hamas, they clustered it with 10 other addresses, eventually tracing at least one transaction to a Turkish national who operated an unlicensed money transmitting business.

“While these individuals believe they operate anonymously in the digital space, we have the skill and resolve to find, fix and prosecute these actors under the full extent of the law,” said Michael Sherwin, Acting U.S. Attorney for the District of Columbia.