A terrorist group's attempt to hide its money using Bitcoin didn't end well.
Criminals have long seen cryptocurrencies like Bitcoin as a stealthy way to transfer money. But in an unusual sting operation, federal agents not only infiltrated a terrorist group’s Bitcoin operation, but tricked its supporters into sending the digital currency to the U.S. government.
On Thursday the Justice Department revealed details of the sting, which was part of a sprawling investigation into the financial operations of three global terrorist organizations: Islamic State, Al-Qaeda, and Hamas.
The investigation involved the seizure of hundreds of cryptocurrency accounts containing more than $1 million, as well as four Facebook pages that the Islamic State was using to sell phony personal protective equipment.
According to the Justice Department, all three terrorist organizations have been encouraging supporters to send them cryptocurrency. This encouragement included propaganda like the Hamas poster shown below. (The poster was included in the Department’s release; we’ve added circles to show the Bitcoin solicitation.)
In the course of the investigation into Hamas’ military wing, known as the Al-Qassam Brigades, federal agents seized one of the group’s websites, located at alqassam.net. The U.S. then began covertly operating the site and pocketing the Bitcoin donations it received.
“During that covert operation, the website received funds from persons seeking to provide material support to the terrorist organization, however, they instead donated the funds [to] bitcoin wallets controlled by the United States,” the Justice Department statement reads.
Even though people can send and receive Bitcoin in semi-anonymous fashion, every transaction is recorded on a public ledger known as the blockchain. By tracing those public transactions, speciality firms like Chainalysis—which assisted the FBI with its investigation—can often guess who controls a given wallet containing illicit Bitcoin.
The Justice Department says proceeds from selling the Bitcoin it confiscated will be distributed to victims of terrorism.
