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Exclusive: Israel seized Binance crypto accounts to 'thwart' Islamic State, document indicates

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Smartphone with displayed Binance logo and symbol of cryptocurrency are placed on keyboard in this image shot, November 8, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON, May 4 (Reuters) - Israel has 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 seized two Binance accounts and their contents, one of the papers on the NBCTF's website indicated. The seizure was to "thwart the activity" of Islamic State and "impair its ability to further its goals," the NBCTF claimed on its website.

The NBCTF document, which has not been previously disclosed, did not offer any data on the value of the crypto recovered, nor how the accounts were tied to Islamic State.

Binance, the world's biggest crypto exchange by trading volumes, did not reply to Reuters' calls and emails seeking comment before this item was published on Thursday.

In a blog post following its publication, Binance argued that Reuters was "deliberately leaving out critical facts".

The exchange has been "working closely with international counter-terrorism authorities" on the seizures, Binance stated. "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 stated.

Israel's defence ministry, which is responsible for the NBCTF, did not reply to Reuters requests for comment.

Under Israeli legislation, the country's defence minister may order the seizure and confiscation of assets that the ministry believes relevant to terrorism.

Regulators internationally have long sought for stronger oversight on crypto exchanges to avoid criminal activity, from money laundering to the funding of terrorism. The seizures by Israel's NBCTF underscore how governments are pursuing crypto firms in their attempts to curb unlawful behavior.

Binance, created in 2017 by CEO Changpeng Zhao, says on its website it examines information requests from governments and law enforcement organizations on a case-by-case basis, giving information as legally necessary.

Binance has also stated it checks users for ties to terrorism and has "continued to invest tremendous resources to enhance its compliance program," it informed U.S. senators in March in response to their demands for details on Binance's regulatory compliance and finances.

The exchange's rules and practices meet with European Union anti-money laundering and counter terrorism-financing laws, Binance wrote in its blog on Thursday.

Islamic State developed in Syria following Iraq's civil war. At its 2014 height, it held a third of Iraq and Syria, before being driven back. Now driven underground, Islamic State fighters continue to undertake guerrilla strikes.

The U.S. Treasury revealed in a report last year that Islamic State had received crypto contributions it subsequently converted to cash, obtaining money through crypto trading platforms. The Treasury did not disclose specific platforms and refused to comment for this piece.

The owner of the two Islamic State-linked Binance accounts seized by Israel was a 28-year old Palestinian named Osama Abuobayda, the NBCTF document says. Abuoyada did not reply to requests for comment through email addresses and a phone number mentioned in the NBCTF document.

In a series of investigations last year, Reuters found that Binance purposely preserved poor anti-money laundering measures. Since 2017, Binance has handled over $10 billion in payments for criminals and corporations attempting to skirt U.S. sanctions, Reuters said. Binance contested the publications, calling the illicit-fund computations erroneous and the representations of its compliance systems "outdated."

Two guys accused by Germany of supporting an Islamist shooter who murdered four people in Vienna in 2020 used Binance, a letter from German authorities to the firm revealed. Islamic State subsequently claimed credit for the incident.

Binance provided information with the authorities about the customers, its legal counsel stated last year. Reuters could not independently establish this.

Nearly all of the 189 Binance accounts confiscated by Israel since Dec. 2021 were controlled by three Palestinian currency exchange organizations, the NBCTF papers indicated.

The three are recognized by Israel as "terrorist organizations," according to a list on the NBCTF's website, for their alleged participation in the transfer of finances by Hamas, which administers the Palestinian region of Gaza.

Last month, the NBCTF announced in a document it had confiscated crypto worth over 500,000 shekels ($137,870) from over 80 Binance accounts linked to the three Gaza-based organizations, 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 paper added, without elaborating. Local media sources in Israel already reported the April raids.

A individual with firsthand knowledge of Al Mutahadun stated it did not work "at all" with crypto or coordinate with Hamas. "We are a money exchange firm. Israeli charges are all falsehoods and are foundless," the individual stated.

Al Mutahadun was labeled as a "terrorist organization" in May 2021 by Israel, the NBCTF list says.

Al Wefaq and Dubai Co. did not reply to Reuters' attempts for comment through email and WhatsApp.

Binance did not reply to Reuters' inquiries on the accounts held by the three currency exchange businesses.

In its blog post, Binance stated it collaborates 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 relationship with the money exchange firms, spokeswoman Hazem Qassem stated. The charges of ties to the enterprises were an effort by Israel to "justify its economic war against Gaza and its people," Qassem added.

Hamas's armed wing stated last week it would halt collecting payments in bitcoin amid an uptick in "hostile" actions against supporters.

Binance, its CEO Zhao and its former compliance officer Samuel Lim are facing civil charges from the U.S. Commodity Futures Trading Commission (CFTC) for "wilful evasion" of U.S. commodities regulations.

Zhao has characterized the allegations a "incomplete recitation of the facts."

In its lawsuit, the CFTC claimed Lim obtained information in 2019 regarding Hamas' activities at Binance. Lim informed a coworker that "terrorists" normally send little quantities of payments, since "large sums constitute money laundering," according to the CFTC complaint.

Lim has not publicly replied to the claims. He did not react to messages received over Telegram requesting comment for this report.

($1 = 3.6266 shekels)

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