The leader of the LulzSec hacking group has been accused of being a front for recruitment to extremist causes which aim to create a group of "domestic terrorists".

The accusation is made against "Sabu", believed to be a Puerto Rican living in New York, who has acted as the head of the group which over the past few months has carried out online break-ins and attacks on websites belonging to the US Congress, UK Serious Organised Crime Agency, and NATO. Sabu has denied the allegation in a Twitter discussion with the Guardian: "I'm not affiliated to any terrorist groups," he said.

The claim comes as police extended their interview of an 18-year-old man who was arrested in the Shetland Islands on Wednesday – alleged to be "Topiary", the group's principal spokesman. Police are believed to have arrested and bailed another LulzSec member, known online as "Tflow", last week.

So far three people in the UK have been arrested in the past five weeks over involvement in LulzSec, and a 17-year-old was interviewed by police on Wednesday in Lincolnshire, though no arrest was made.

In the Shetlands, people said that the person who was arrested on Wednesday, apparently in the town of Scalloway, was not from the island and expressed puzzlement at what had happened.

The accusation against LulzSec's leader is part of an analysis of Sabu's connections and actions by a hacker who calls himself "The Jester", thought to be ex-US military.

He styles himself as an American patriot, and usually attacks Islamic jihadist websites, but has become increasingly embroiled in rows with the broader Anonymous hacking collective and LulzSec following the release of US diplomatic cables by WikiLeaks last year: he instituted an attack against the site which put it briefly offline. Anonymous broadly backs WikiLeaks.

The Jester has repeatedly expressed his opposition to LulzSec's actions, and sought to identify them by gathering documentation – "dox" – about them. But in an online analysis on Thursday night The Jester described the "hacktivism" carried out by groups such as LulzSec and Anonymous as "the perfect recruitment tool for terrorist organisations".

He recounted the example of how in the 1990s two American hackers were challenged by an anonymous man who challenged them to prove their skills by breaking into government and defence systems.

The information they gained is believed to have been used in the 1999 hijacking of an Indian Airlines flight by a Pakistan-based group. One passenger died and several were wounded in the aftermath.

"It would not be far-fetched that a terrorist group such as Hamas would use Anonymous/LulzSec as a front to recruit support or to entice young hackers to commit acts that would promote a terrorist cause," he writes.

He then points to elements in Sabu's online persona, including the use for his Twitter account of the flag of the Palestinian Islamist group Hamas, and his repeated boosting of a rapper called "Beast1333" whose site The Jester says "seems to be some kind of recruiting site for Hamas and even sells bulletproof vests. Could not make this stuff up if I tried."

He admits that the evidence is circumstantial but adds that hackers joining Anonymous are "vulnerable to what may very well be a terrorist organisation".

Sabu on Twitter dismissed the suggestion. "[It's] solidarity with Palestine. And Gaza government," he said to explain the flag on his Twitter account. "US [and] Israel pushed the Gazans to democratically elect a government and they chose Hamas. US/Israel did not accept it. [The] people do."

Graham Cluley, a senior technology consultant at the security company Sophos, said: "I think it basically comes down to one question – could groups like Anonymous/LulzSec be infiltrated and manipulated by those with dangerous agendas without the realisation of the foot soldiers? And I think the answer has to be yes. That's possible."

But he added that "it's also possible that there is an obsessive rap fan out there who imagines it's cool to use images of weaponry, war and resistance".

Rik Ferguson, of the security consultancy Trend Micro, said he was sceptical of the connection.

"As he admits, it's all circumstantial. There's nothing that ties it together. He says that this Sabu calls people 'brother' and 'sister' – well, they do where I live in England. And as for bulletproof vests – they're not illegal to import into the US. And I can imagine some rappers who might find them stylish as well as useful."