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Foreign Bitcoin Donation Reveals Challenges and Opportunities in Combating DEV Financing

Updated: Mar 16

Team/Authors: ILLICIT FINANCE, Timothy Botros and Jessa Hauck

Date: March 1, 2021



Far-right insurrectionists received funding from cryptocurrency and online crowdfunding [1]


Name: Mr. Laurent Bachelier (AKA “Pankkake”)

Occupation: Programmer and Blogger

Location: Paris, France


Suspicious Activity Information:

Amount involved: $522,000

Date or date range for activity: December 8, 2021


Activity:

Violent Extremist Financing $522,000

Terrorist Financing

Fraud

Money Laundering

Digital Money Laundering


If violent extremist financing or terrorist financing, please list the known or suspected terrorist/extremist individual or organization:

  • Nick Fuentes, Ethan Ralph, Bitchute, Patrick Casey, Vincent Reynourard, Lukesmith.xyz, ruqqos.com, Daily Stormer, Patrick Casey, VDARE, MR. OBVIOUS, Gab, The Unz Review, amren[2]

  • Affiliations: Riccardo Spagni (AKA “Fluffy Pony”), Proud Boys, Oath Keepers, white nationalist groups[3]

If fraud, please list the fraud type (check, loans, pyramid scheme, wire, etc. if unknown, put unknown):

  • N/A

If money laundering, please explain in detail:

  • N/A

If digital money laundering, please explain in detail and what cryptocurrency used:

  • N/A

On December 8, 2020, far-right extremists involved in the January 6th Capitol Hill riots received the majority of Bitcoin donations from an international supporter in the amount of 28.15 Bitcoin, approximately $522,000, to several far-right media personalities including Nick Fuentes, Ethan Ralph, and the anti-immigration website VDARE.[4] Out of the 22 wallet donations discovered by Chainalysis, three could not be identified while only three more were unrelated to the far-right.[5] While not connected to the riots outright, Chainalysis reported that the timing of the transactions “warrants suspicion.”[6]The French programmer took his own life the next day, after having sent out the contributions to specific causes and people he believed would make more optimal use of the money.[7]In his suicide note, Bachelier lamented turbulent medical conditions suffered, various conspiracy theories, and the “downfall of Western civilization” as reasons for taking his own life.[8] Along with his contribution, many other extremist groups have also reportedly received additional donations through crowdfunding platforms and social media. According to TechCrunch, Telegram removed "dozens" of its channels on January 12--just six days after the Capitol Hill incident--due to concerns over accounts inciting violence.[9] Likewise, due to a non-robust content moderation apparatus, the streaming platform DLive reportedly struggled to take down users who had been live-streaming themselves while storming the Capitol buildings in real-time. Through DLive’s own “Lemon'' cryptocurrency reward point system, experts estimate that such content creators including BakedAlaska made “thousands of dollars” from the donations received on January 6th.[10] According to the Southern Poverty Law Center, Nick Fuentes himself was able to fetch $44,000 in donations through DLive donations between November and December of 2020.[11] It is almost certain that far-right extremists both in the US and internationally will continue to use Bitcoin and other forms of cryptocurrency to fundraise and make donations, namely through accounts on less trackable platforms like Telegram, VK, Parler, and Gab while using increasingly popular privacy coins such as ZCash and Monero. However, social media platforms like Twitter, Facebook, and YouTube are likely to see declines in web traffic related to these financial transactions, leading to recent crackdowns on extremist fundraising having less of an impact.


Far-right extremists attacked the U.S. Capitol on January 6, 2021, in hopes of preventing Congress from certifying the electoral win of then-President-elect Joe Biden. The extremists were funded in part by Bitcoin, which has been a popular, non-traditional financial tool for them since the 2017 “Unite the Right” rally in Charlottesville, VA. The United States government is currently investigating the role Bitcoin played in the insurrection. Researchers believe that this large funding incident indicates that U.S. extremist organizations are “more organized and funded than previously thought.”[12]


Given the popular online currency’s decentralized and expansive nature, governments cannot realistically curtail Bitcoin’s utilization in advancing these groups’ organization and funding mechanisms. However, Chainalysis'discovery highlights the promising potential for regulators and law enforcement to track Bitcoin transactions made to and from wallets associated with problematic groups if equipped with dedicated monitoring resources.[13] Leaning on Bitcoin’s own reliance on openly available public ledgers would allow agencies to obtain actionable intelligence that could be used to better understand the operational capacities of these groups, while most effectively mitigating their mobilization efforts.


Failure to cut off increasingly popularized crypto donation funding will likely embolden extremists and allow their resolve and morale to grow exponentially stronger, which will lead to more frequent incidents like 2017 Unite the Right rally and the 2021 attack on the U.S. Capitol building. In combination with organizational morale and popularity, funds from Bitcoin--a commodity growing value faster than that of any traditional fiat currency--can also enhance the ability of these groups to expand operations, plan future events, and create robust recruitment programs.


CTG’s Illicit Finance team has recently completed a specialty report outlining the motivations and methodologies behind propaganda-related financing, stressing particular concern over an increasingly lucrative far-right disinformation market that has become interwoven with America’s right-wing media ecosystem. While it is not yet understood whether Bachelier’s last-ditched efforts before committing suicide were intended specifically for the ensuing insurrection, they are nonetheless a glimpse into the extent to which disinformation campaigns can successfully lure online sympathizers to financially back extremist causes. This is evidenced by Bachelier’s fatalistic suicide note which firmly connects the fabrication of 9/11, COVID-19, and the Black Lives Matter (BLM) movement, as well as other prominent far-right conspiracy theories, to an “existence of Evil.” [14]


Despite recent actions taken by PayPal, crowdfunding sites like GoFundMe, and credit card payment processing platforms to no longer accept payments or donations from far-right extremists, the groups still have access to alternative platforms including VDARE and Daily Stormer.[15] The Financial Crimes Enforcement Network (FinCEN) and Congress have both taken steps to address the issue. FinCEN has expanded its current proposed rule notice regarding establishing requirements for banks to report on virtual currency transactions.[16] Meanwhile, Congress held a hearing to discuss cryptocurrency funding of domestic terrorism.[17]


In the case of Bachelier’s crypto wallet donations, a major risk factor was the fact that the regulation of such cryptocurrency transactions is relatively non-existent in both France[18] and the U.S.[19] Cryptocurrency must therefore be increasingly regulated in such jurisdictions by the same risk frameworks that are currently in place for banks and financial institutions, such as due diligence and Know Your Client (KYC) procedures, which work to identify actual customers opening accounts and determine the risk in conducting business with them. As banks and other financial institutions are not currently capable of maintaining this role, national governments and cryptocurrency companies, which have the necessary capabilities, must do so. Moreover, applications such as PayPal, Square, and CashApp as well as crowdfunding platforms must continue to ban known extremists from their platforms and impose their own restrictions on terror and extremist financing.


As CTG has previously reported, extremists were openly discussing their plans to come to the U.S. Capitol prior to their attack. A visible lack of communication and coordination between law enforcement officials and intelligence agencies, including the Department of Justice and Department of Homeland Security, regarding the online chatter, had directly contributed to the failure of preventing the incident from occurring. Germany’s security measures for its federal parliament will be reviewed as it assesses the U.S. Capitol attack.[20] CTG encourages other foreign governments to review their security protocols in the same manner as well.


Along with improved communication and coordination within these countries’ security apparatuses, CTG also recommends coordinating with foreign countries to combat the rise of cryptocurrency and crowdfunding platforms. International bodies, including the International Monetary Fund (IMF), United Nations Office on Drugs and Crime (UNODC), FinCEN, INTERPOL, FATF, corporations, and states, must work together to forge stronger international compliance programs centered around cross-border financing of violent extremism. Governments should focus on educating agencies and corporations on the rise of advanced extremist networks and assist in facilitating better connections and communications between their financial institutions and law enforcement. In doing so, they must also create a standard policy for preventing extremist groups from using cryptocurrency, crowdfunding platforms, and social media to generate financing used for violent attacks and recruitment purposes. Recently, Australia, Canada, and the Isle of Man enacted laws that ruled that cryptocurrency transactions and the institutions that support them fall under money laundering and counter-terrorism financing laws.[21] As Bachelier’s contributions are considered to have been legal,[22] such legislation can and should be taken up by foreign governments deprived of such laws in order to effectively prevent these transactions from occurring. States and local banks and financial institutions must educate their front-line staff to be on the lookout for potential suspicious financial activity by extremists, including larger than normal deposits and foreign wire transactions from non-traditional sources. By providing staff with more knowledge, they are more likely to prepare detailed Suspicious Activity Reports (SAR) which in turn helps financial intelligence units and law enforcement in their investigations. Furthermore, CTG recommends a universally accepted suspicious activity report template be adopted, to include specific guidelines regarding all the required necessary information to be listed since countries do not have uniform reporting standards. A universal SAR would promote better sharing of information, a better quality of data, and increased awareness of extremist activities in need of international monitoring and investigation.

________________________________________________________________________ The Counterterrorism Group (CTG)

[1] “White Concrete Buildinh” by Michael Judkins licensed under Pexels

[2] The Chainalysis 2021 Crypto Crime Report, Chainalysis, February 2021, https://go.chainalysis.com/rs/503-FAP-074/images/Chainalysis-Crypto-Crime-2021.pdf

[3] Unmasking the Deceased Programmer Who Donated 28 Bitcoin to Capitol Hill Rioters, CryptoBriefing, January 2021, https://cryptobriefing.com/unmasking-deceased-programmer-donated-bitcoin-capitol-hill-rioters/

[4] Alt-Right Groups and Personalities Involved In the January 2021 Capitol Riot Received Over $500K In Bitcoin From French Donor One Month Prior, Chainalysis Blog, January 2021, https://blog.chainalysis.com/reports/capitol-riot-bitcoin-donation-alt-right-domestic-extremism

[5] The Chainalysis 2021 Crypto Crime Report, Chainalysis, February 2021, https://go.chainalysis.com/rs/503-FAP-074/images/Chainalysis-Crypto-Crime-2021.pdf

[6] Ibid.

[7] Unmasking the Deceased Programmer Who Donated 28 Bitcoin to Capitol Hill Rioters, CryptoBriefing, January 2021, https://cryptobriefing.com/unmasking-deceased-programmer-donated-bitcoin-capitol-hill-rioters/

[8] Ibid.

[9] Telegram blocks ‘dozens’ of hardcore hate channels threatening violence, TechCrunch, January 2021, https://techcrunch.com/2021/01/13/telegram-channels-banned-violent-threats-capitol/

[10] A Game Livestreaming Site Has Become an Extremist Haven, WIRED, January 2021,

https://www.wired.com/story/dlive-livestreaming-site-extremist-haven/

[11] Ibid.

[12] $500K in Bitcoin sent from France to US far-right groups, Associated Press, January 2021, https://apnews.com/article/capitol-siege-international-news-technology-suicides-france-1e36d9c422b097a16c44b3bf5c8c3f46

[13] Unmasking the Deceased Programmer Who Donated 28 Bitcoin to Capitol Hill Rioters, CryptoBriefing, January 2021, https://cryptobriefing.com/unmasking-deceased-programmer-donated-bitcoin-capitol-hill-rioters/

[14] Ibid.

[15] Visa, Discover Pare Deals With Extremist Groups After Rally, Bloomberg, August 2017, https://www.bloomberg.com/news/articles/2017-08-16/discover-ends-dealings-with-hate-groups-after-charlottesville, Banned from PayPal, Right Wing Reporter Tommy Robinson Turns to Bitcoin, CryptoGlobe, November 2018 https://www.cryptoglobe.com/latest/2018/11/banned-from-paypal-right-wing-reporter-tommy-robinson-turns-to-bitcoin/

[16] Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets, Federal Register, January 2021, https://www.federalregister.gov/documents/2021/01/28/2021-01918/requirements-for-certain-transactions-involving-convertible-virtual-currency-or-digital-assets

[17] US Lawmakers to Examine Crypto’s Role in Domestic Terrorism Funding, Coindesk, Febuary 2021, https://www.coindesk.com/us-lawmakers-to-examine-cryptos-role-in-domestic-terrorism-funding

[18] Regulation of Cryptocurrency: France, Library of Congress, December 2020, https://www.loc.gov/law/help/cryptocurrency/france.php

[19] How the laws & regulations affecting blockchain technology and cryptocurrencies, like Bitcoin, can impact its adoption, Business Insider, January 2021, https://www.businessinsider.com/blockchain-cryptocurrency-regulations-us-global#:~:text=Blockchain%20Regulations%20in%20the%20U.S.&text=While%20FinCEN%20does%20not%20consider,has%20issued%20tax%20guidance%20accordingly.

[20] Germany reviews parliament security after US Capitol riot, Deutsche Welle, January 2021, https://www.dw.com/en/germany-reviews-parliament-security-after-us-capitol-riot/a-56161097

[21] Regulation of Cryptocurrency Around the World, Library of Congress, June 2018, https://www.loc.gov/law/help/cryptocurrency/world-survey.php

[22] Far Right Groups Get Bitcoin Windfall Weeks Before Capitol Riot, Bloomberg, January 2021, https://www.bloomberg.com/news/articles/2021-01-19/far-right-groups-get-bitcoin-windfall-weeks-before-capitol-riot






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