Terrorist use of crypto casts a cruel shadow

Making a connection between the New York trial of disgraced FTX tycoon Sam Bankman-Fried and Hamas terrorists may seem the stuff of conspiracy theories.

But there is a common thread, in the shape of crypto-currencies.

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Bankman-Fried used the public markets to turn crypto deals and investment into a trading platform, which at its peak valued his personal fortune at an astonishing $40billion. Hamas and other terrorist organisations regard crypto as a gift from the gods, which allows them to collect and move funds around the globe with minimum intrusion.

The crypto craze has never been anything more than a giant Ponzi scheme.

The blockchain technology involved may have value and central bank digital currencies may eventually become critical to the global financial system.

However, when I think crypto, Morgan Stanley boss James Gorman’s words come to mind. ‘Current value of bitcoin, $60,000. Real value, zero.’ What one hadn’t realised at the time is that the biggest player in the market, Bankman-Fried, would have a dramatic fall from grace, as elegantly described by Michael Lewis in his intriguing homage Going Infinite. 

Regulators, including the UK’s Financial Conduct Authority, have warned of crypto risks and its use by money launderers. But there has been little public recognition that it is the favoured means of exchange for terrorists. 

Hamas’s barbaric surprise attack on Israel a week ago may largely have been financed by Iran. US investigators also have uncovered a far flung network of online donors to Hamas, Islamic Jihad and other proscribed enterprises.

Before the current conflict, the US Justice Department already was pursuing a series of money laundering cases involving Hamas. Little is known because files are sealed for national security reasons.

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Among Israel’s first actions, as it retaliated against Hamas, was to seize crypto-currency addresses linked to it and another militant Palestinian group. Some tens of millions of dollars in crypto allegedly have passed through these accounts.

Crypto offers an organisation designated as terrorist by the US, Britain and the EU (but not the BBC!) to evade sanctions.

Stopping the activity, according to a former CIA analyst quoted by CNN, ‘is a constant game of cat and mouse’. Both Facebook and X have been used to post wallet addresses which allow Hamas sympathisers to donate in crypto.

In Israel this spring, I found myself debating crypto with an American philanthropist. He related how along the bitcoin journey he had made substantial sums of money. If he had known that in trading bitcoin he was indirectly supporting violent enemies of Israel, he might have been less positive.

Doubling down

If you thought the age of mega-takeovers had passed, forget it. Cash rich giants see an opportunity at a time of higher borrowing costs, which makes leverage less attractive.

The £60billion Microsoft deal for gaming group Activision was unveiled in 2022. Perseverance has paid off and final approval from the UK’s Competition and Markets Authority has been agreed after some feisty opposition. At a time when US and European regulators are directly seeking to curb the power of big tech, it is hard not to think that even after amendments, it is a deal gamers will come to regret. Microsoft effectively has been handed the keys to the bank.

In another part of the dealmaking forest, Exxon agrees with green-tinted former Bank of England governor Mark Carney that fuel security makes sense. It is increasing exposure to the Permian Basin in Texas and Liquefied Natural Gas with a £50billion deal for Pioneer Natural Resources.

Finally, gold miner Newmont is backing bullion, having won shareholder approval for a £14billion bid for Australian-based rival Newcrest Mining.

Fossil fuels, gold and gaming are ‘go to’ safe havens amid the global turmoil of Russia’s war on Ukraine and conflagration in the Middle-East.

Rich pickings

Friends and family who decided that it was worth paying a little extra for the wealth management services of St James’s Place (SJP) may be alarmed to learn that they are being treated unfairly. 

SJP’s stock tumbled in latest trading (it is down 35 per cent since July) after the FCA let it be known it was looking at less than transparent fees for financial advice and penal charges for withdrawals. Fancy cocktail evenings and claret lunches with advisers come at heavy price.