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  • L Higgins and S Pettigrove

Much ado about crypto? Chainalysis and Elliptic skewer WSJ report

In an era when blockchain technology and cryptocurrencies are increasingly intertwined with global finance and fears as to technology (including AI) are rife, it's crucial that the media accurately reports on the facts, especially in such serious matters as terrorism financing. A recent case involving The Wall Street Journal's (WSJ) coverage of Hamas and other militant groups' alleged cryptocurrency fundraising activities highlights the need for better understanding and clearer reporting and shows how mis-reporting can snowball and have outsized consequences.

Following the devastating and surprise terrorist attacks on Israel, on 10 October, the WSJ published an article titled "Hamas Militants Behind Israel Attack Raised Millions in Crypto." The article, citing a report from blockchain forensics firm Elliptic, suggested that Palestinian Islamic Jihad (PIJ), a designated terrorist organisation operating in the Gaza Strip, had raised as much as USD$93 million through cryptocurrency donations and transfers between August 2021 and June 2023.

However, this reporting mis-interpreted the reporting from Elliptic. Elliptic quickly clarified that the USD$93 million figure was not necessarily connected to PIJ's terrorist activities. In fact, research from another blockchain forensics firm, Chainalysis, suggested that only $450,000 of the funds were sent to a known terrorism-affiliated wallet.

The WSJ issued a partial correction that acknowledged the revised figures, stating that PIJ and the Lebanese political party Hezbollah "may have exchanged" up to USD$12 million in cryptocurrency since 2021, significantly lower than the USD$93 million previously reported by the organisation. The correction also included "additional context" regarding Elliptic's research.

This retraction followed a statement by Elliptic on 25 October, in which the firm called on the WSJ to correct its mistakes. Elliptic also stressed that cryptocurrency funding by Hamas remains relatively "tiny" compared to other funding sources.

However, while the correction is an important step in ensuring the accuracy of reporting, some in the cryptocurrency industry and beyond remain highly critical of the WSJ's handling of the matter. Paul Grewal, the chief legal officer of Coinbase, noted that the WSJ's initial framing of cryptocurrency as the primary funding source behind Hamas' attack on Israel was not adequately addressed in the correction.

It is curious as to why the WSJ did not correct their article to the same extent it was critiqued by Elliptic, who went as far as to say:

There is no evidence to support the assertion that Hamas has received significant volumes of crypto donations.
A full understanding of blockchain analysis and the context of any analysis is needed when using these insights to draw conclusions.
Elliptic has engaged with the Wall Street Journal to correct misinterpretations of the level of crypto fundraising by Hamas.
In addition, we have been in discussions with the office of Senator Warren to ensure that the relevant parties have a proper appreciation of the complexities and nuances of analyzing these wallets.

Noting the discrepancy, Elliptic made the following post on X:

On 17 October 2023, Senator Elizabeth Warren and more than 100 lawmakers of the US Government issued a letter calling for action to "meaningfully curtail illicit crypto activity", citing as their only footnote the original and WSJ article. In light of Elliptic and Chainalysis' corrections, several industry participants have taken to social media to call on Senator Warren to retract the letter:

Senator Warren's response was to claim calls for accuracy "lobbying" and during senate hearings she was repeatedly corrected by those giving testimony.

The correction by the WSJ highlights the importance of accurate reporting when it comes to blockchain technology, cryptocurrencies, and their potential implications for international security or money laundering. Chainalysis publishes a regular Crypto Crime Report and Eliptic recently published a report on cross-chain crime.

The evolving landscape of these technologies requires careful and precise analysis to avoid unnecessary alarm and misinformed policy decisions, noting that blockchain technology is at a critical juncture of its "mainstreamification". As blockchain and related technological innovations continue to play a more significant role in our global financial systems, it is paramount that media companies, regulators, lawmakers, and researchers work in tandem to ensure accurate and otherwise avoid misinformation.

In a world where facts and figures can shape policy and perception, precision and honest reporting is more important than ever.

By Michael Bacina and Luke Higgins


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