On August 26, the co-founder of Paxful, a peer-to-peer crypto platform, and CEO of the financial communication app Noones, Ray Youssef, claimed that the Cryptocurrency giant, Binance, had seized all funds from all Palestinian users at the request of the Israeli Occupation Forces (IOF).
Ray Youssef shared a letter on the X platform, reporting that Binance cited a letter signed in November 2023 by Israel’s National Bureau for Counter-Terror Financing, which stated in Hebrew that the anti-terrorism laws allow the Minister of Defense to issue a “temporary seizure of property of a declared terrorist organization,” including cryptocurrency funds. The seizure affected all Palestinians, alleges Youssef.
Youssef also shared a screenshot of the email Palestinians received from IOF when Binance seized their funds.
Binance Faces Backlash for Allegedly Freezing Palestinian Funds
The cryptocurrency giant Binance has been accused of seizing funds from Palestinian users at the request of the Israeli Occupation Forces (IOF). The allegations have triggered a significant backlash against Binance within the crypto community. The giant cryptocurrency company has since received backlash, with many users online calling for a boycott, and accusing the platform of supporting “Israeli apartheid” by complying with Israeli government demands.
An X user shared a video, along with the caption, "Time to boycott @binance They are working with the #IsraeliApartheid to seize and freeze our brothers and sisters' assets based on Israeli demands, Crypto is meant to be decentralized, not controlled by the government. I deleted my account, now it's your time guys."
Moreover, social media users attempted to link the alleged seizure of Palestinian assets with the Bitcoin withdrawals, suggesting that 44,808 Bitcoin worth $2.6B were withdrawn from Binance within 24 hours, which was a direct result of a global backlash.
However, closer examination reveals no compelling truth. On August 27, Binance moved 30,000 bitcoins from its cold storage to an omnibus hot wallet, and such a strategic move appears to have been aimed at ensuring the exchange could manage the withdrawal demands smoothly, according to Cryptonite.
Binance CEO Denies Mass Freezing of Palestinian Crypto Funds
Shortly after the misleading allegations towards Binance went viral, Binance strongly denied blocking cryptocurrency from all Palestinians, stating that, “Only a small number of user accounts, linked to illicit funds, were blocked from transacting.” Binance labeled the claims as “FUD” (fear, uncertainty, and doubt).
"There have been some incorrect statements around this. Only a small number of user accounts, linked to illicit funds, were blocked from transacting,” Binance told Cointelegraph.
The spokesperson also said the company complies with "internationally accepted sanctions legislation, just like any other financial institution."
Furthermore, data from a software company, Similarweb, cited by Cointelegraph found that Palestine was a "minor market" for Binance, with the traffic share amounting to roughly 0.05 percent of Binance's visits over the past year.
In the same context, the CEO of Binance, Richard Teng, took to social media platform X to dismiss the allegations regarding restricting Palestinian crypto funds. Only a limited number of user accounts, linked to illicit funds, were blocked from transacting. There have been some incorrect statements about this, Teng said on Wednesday.
The CEO of Binance noted that some statements made about the situation were inaccurate and emphasized that his company adheres to internationally accepted anti-money laundering regulations.
Israel Accuses Binance of Breaking Financial Laws
On October 10, news outlet Calcalist reported that Israeli officials froze the crypto accounts of Hamas members. The move was reportedly done in collaboration between Binance and Israel's cyber unit. The Israeli law enforcement claimed that Hamas used the accounts to collect war-related funding via social media according to a report from the Financial Times.
A few weeks after the announcement, Israeli authorities reportedly seized $1.7 million worth of cryptocurrency from other groups, including Hezbollah and Quds Force.
Furthermore, the Treasury Department accused cryptocurrency exchange Binance of failing to take actions to curtail Hamas from operating on the platform. Additionally, social media users circulated a claim alleging that Binance laundered money for Hamas.
Relevantly, the former chief executive of Binance, Changpeng Zhao, was sentenced in April to four months in prison after pleading guilty to violating U.S. money-laundering laws at the world’s largest cryptocurrency exchange. U.S. officials said Zhao deliberately looked the other way as people conducted transactions that supported illegal drug trade and “terrorism.”
Palestinians Use Cryptocurrencies as Alternative Amid A Devastated Banking System in Gaza
On August 21, the general manager of the Association of Banks in Palestine, Bashar Yasin, declared that all banks across Gaza had halted operations. The association represents banks across the occupied West Bank and Gaza Strip.
The Israeli Occupation Forces (IOF) have destroyed the vast majority of banks across Gaza, according to the Palestinian Monetary Authority. Several banks had been semi-operational across Gaza before the Banks Association announcement, including a large Bank of Palestine branch in the central city of Deir al-Balah. People in Gaza are desperately short of cash due to the destruction of banks, power cuts that shut down ATMs and the frequent displacements caused by the ongoing violence by Israel.
As a result, many Palestinians have turned to cryptocurrencies to navigate the financial and economic collapse. Digital money has become crucial in sustaining life in Gaza and providing urgent humanitarian assistance to civilians.
Aid workers had been receiving donations from abroad via USDT to create food baskets to feed families. This aid has been critical in securing “food, water, clothes, and other necessities during these hard days of the genocide,” aid workers told The New Arab. The aid worker has simultaneously collaborated with mutual aid groups abroad to establish a local team aiming to alleviate the severe humanitarian suffering affecting civilians.
“I received money via cryptocurrency platforms and then exchanged the money here. We distributed food baskets to hundreds of families in need in the northern Gaza Strip. Without the cryptocurrency platforms, we wouldn’t be able to do this campaign and receive funds,” on Telegram, there is a group that provides the opportunity for thousands of traders and exchange offices in Gaza to buy and sell cryptocurrencies, the aid worker told The New Arab.
The aid worker acknowledged that despite the exorbitant fees that exchange offices now charge ranging from 15% to 22%, compared to just 1% before the war and the cost of living in Gaza, the aid worker highlights a silver lining that traditional banking systems cannot provide:
“The good thing about cryptocurrency platforms is receiving and sending money easily and instantly without restrictions, away from the complicated processes of banks.”
Israel Exploits the War to Justify Seizing $35 Million From Palestinian Money
On June 11, the Israeli newspaper "Israel Today" reported that far-right Israeli Minister of Finance, Bezalel Smotrich, ordered the deduction of 35 million U.S. dollars from the Palestinian Authority’s tax funds (clearance funds) and transferring them to Israeli families.
The newspaper reported that Smotrich instructed the deduction of 130 million shekels (35 million U.S. dollars) from Palestinian tax funds and transferred it to 28 Israeli families.
Smotrich claimed that "The Palestinian Authority encourages terrorism and pays money to the families of terrorists, prisoners, and freed Palestinian prisoners," and will transfer them to the families of "victims of terrorism."
Clearance funds are the taxes paid by Palestinians on goods imported from Israel or through Israeli border crossings, with a monthly average of $220 million.
The Palestinian government mainly uses clearing funds to pay the salaries of public employees, and they constitute 65% of the total financial revenues of the Palestinian Authority.
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