Israel Seized $1.7M in Crypto

By SCARS Editorial Team – Society of Citizens Against Relationship Scams Inc., positions from Reuters and CoinDesk

Israel Seized $1.7M in Crypto From Iranian Military and Hezbollah With Chainalysis’ Aid

The Israeli government seized the crypto wallets after an order from Defense Minister Yoav Gallant earlier this week.

The Israeli government has seized $1.7 million in crypto from wallets linked to the Iranian military and the Iran-backed Hezbollah militant group in Lebanon with the aide of Chainalysis, according to the Defence Minister announced and the crypto investigations firm.

It was the first time any agency seized crypto (cryptocurrency) from Hezbollah and Iran’s Quds Force, Chainalysis said on Tuesday.

The seizure of the crypto wallets came after Defense Minister Yoav Gallant approved the move several weeks ago, according to a government communique. The effort involved Israel’s Mossad spy agency, its military intelligence office, the Israeli police, and others.

“This is the first event of this magnitude in which an infrastructure headed by Hezbollah and the Iranian Quds Force that transferred millions of dollars for use by terrorist elements was thwarted,” Galant said while speaking at the third crypto conference of the National Bureau for Counter Terror Financing in Israel’s Ministry of Defense.

As many as 40 crypto wallet addresses were on the seizure list and all of the funds were in USDT on the TRON network (USDT-TRON), Chainalysis said. The pattern reflected that funds were moved first from financial facilitators to hawala services and OTC brokers, and then to Hezbollah-controlled addresses at mainstream exchanges.

In May, Israeli authorities seized roughly 190 Binance crypto accounts with alleged ties to terrorist groups such as Hamas and Daesh since 2021, according to Reuters.

“Amazing job my friends Binance,” posted Amit Levin, head of the Economic Department within the Cyber Unit in the Office of the Israel State Attorney, at the time. “Continue cleaning our crypto eco-system from illegal activities.”

Binance aided Israel in this action against Iran and Hezbollah

Previous Crypto Seizures By Israel

Previously in May, Israel seized around 190 crypto accounts at crypto exchange Binance since 2021, including two it said were linked to Islamic State and dozens of others it said were owned by Palestinian firms connected to the Islamist Hamas group, documents released by the country’s counter-terror authorities show.

Israel’s National Bureau for Counter Terror Financing (NBCTF) on Jan. 12 confiscated two Binance accounts and their contents, one of the documents on the NBCTF’s website showed. The seizure was to “thwart the activity” of Islamic State and “impair its ability to further its goals,” the NBCTF said on its website.

The NBCTF document, which has not been previously reported, did not give any details on the value of the crypto seized, nor how the accounts were connected to Islamic State.

The exchange has been “working closely with international counter-terrorism authorities” on the seizures, Binance said. “With regard to the specific organizations mentioned in the article, it’s important to clarify that bad actors don’t register accounts under the names of their criminal enterprises,” it said.

Under Israeli law, the country’s defense minister can order the seizure and confiscation of assets that the ministry deems related to terrorism.

Regulators globally have long called for tighter controls on crypto exchanges to prevent illegal activities, from money laundering to the financing of terrorism. The seizures by Israel’s NBCTF highlight how governments are targeting crypto companies in their efforts to prevent illegal activity.

Binance, founded in 2017 by CEO Changpeng Zhao, says on its website it reviews information requests from governments and law enforcement agencies on a case-by-case basis, disclosing information as legally required. Binance has also said it checks users for connections to terrorism and has “continued to invest tremendous resources to enhance its compliance program,” it told U.S. senators in March in response to their requests for information on Binance’s regulatory compliance and finances.

The exchange’s policies and processes comply with European Union anti-money laundering and counter-terrorism-financing requirements, Binance said in its blog.

Militant Groups

Islamic State emerged in Syria after Iraq’s civil war. At its 2014 peak, it controlled a third of Iraq and Syria, before being beaten back. Now forced underground, Islamic State militants continue to wage insurgent attacks.

The U.S. Treasury said in a report last year that Islamic State had received crypto donations it later converted to cash, accessing funds via crypto trading platforms. The Treasury did not specify which platforms and declined to comment for this article.

The owner of the two Islamic State-linked Binance accounts seized by Israel was a 28-year old Palestinian called Osama Abuobayda, the NBCTF document shows. Abuoyada did not respond to requests for comment via email addresses and a phone number listed in the NBCTF document.

In a series of investigations last year, it was reported that Binance intentionally kept weak anti-money laundering controls. Since 2017, Binance has processed over $10 billion in payments for criminals and companies seeking to evade U.S. sanctions, according to Reuters. Binance disputed the articles, calling the illicit-fund calculations inaccurate and the descriptions of its compliance controls “outdated.”

Two men suspected by Germany of assisting an Islamist gunman who killed four people in Vienna in 2020 used Binance, it was stated in a letter from the German police to the company. Islamic State later claimed responsibility for the attack.

Binance shared information with the police on the clients, its legal representatives said last year. Reuters could not independently establish this.

Money Exchangers

Nearly all of the 189 Binance accounts seized by Israel since Dec. 2021 were owned by three Palestinian currency exchange firms, the NBCTF documents showed.

The three are designated by Israel as “terrorist organizations,” according to a list on the NBCTF’s website, for their alleged involvement in the transfer of funds by Hamas, which runs the Palestinian territory of Gaza.

• In April 2023, the NBCTF said in a document it had seized crypto worth over 500,000 shekels ($137,870) from over 80 Binance accounts belonging to the three Gaza-based companies, Al Mutahadun For Exchange, Dubai Company for Exchange and Al Wefaq Co. For Exchange.
• The accounts were the property of “terrorist organizations” or used for a “severe terror crime,” the document said, without elaborating. Local media outlets in Israel previously reported the April seizures.
• A person with direct knowledge of Al Mutahadun said it did not work “at all” with crypto or cooperate with Hamas. “We are a money exchange company. Israeli allegations are all lies and are foundless,” the person said.
• Al Mutahadun was designated as a “terrorist organization” in May 2021 by Israel, the NBCTF list shows.
• Al Wefaq and Dubai Co. did not respond to Reuters’ requests for comment via email and WhatsApp.

In its blog post, Binance said it works with law enforcement and “leverages information that is only available to them in order to identify individuals operating accounts for illicit organizations.”

Hamas does not have any connection with the money exchange companies, spokesperson Hazem Qassem said. The allegations of links to the companies were an attempt by Israel to “justify its economic war against Gaza and its people,” Qassem said.

Hamas’s armed wing said last week it would stop receiving funds in Bitcoin after an increase in “hostile” activity against donors.

Binance, its CEO Zhao, and its former compliance chief Samuel Lim are facing civil charges from the U.S. Commodity Futures Trading Commission (CFTC) for “wilful evasion” of U.S. commodities laws. Zhao has called the charges an “incomplete recitation of the facts.”

In its complaint, the CFTC said Lim received information in 2019 on Hamas’ transactions at Binance. Lim told a colleague that “terrorists” usually send small sums of funds, as “large sums constitute money laundering,” according to the CFTC complaint.  Lim has not publicly responded to the charges.

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