US Treasury Sanctions Notorious Crypto Mixer Tornado Cash

US Treasury Sanctions Notorious Crypto Mixer Tornado Cash

August 9, 2022

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned popular cryptocurrency mixer Tornado Cash and blacklisted a list of associated Ethereum addresses.

According to the announcement, the decision was taken to prevent further obfuscation of “proceeds from illicit cyber activities and other crimes” as well as uphold U.S national security.

Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence.

OFAC further claimed Tornado cash for repeatedly failing to impose adequate controls designed to prevent it from facilitating financial crimes, despite offering public assurances. Following the sanctions, Circle froze the USDC in accounts linked to those addresses, with GitHub suspending contributions to Tornado.

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Tornado Cash, a protocol built on Ethereum, helps users maintain all-out privacy by indiscriminately facilitating anonymous transactions on the blockchain. The platform receives crypto assets from different transactions, which it then mixes before assisting the users to cash out anonymously. Since its launch in 2019, the protocol has increasingly been scrutinised by US authorities, with more nefarious actors choosing it to launder illicit crypto funds.

According to OFAC, the protocol has been used to launder more than $7 billion in crypto assets since its launch, including $620 million stolen by the North Korea-linked Lazarus Group from the Ronin Network earlier this year. The platform has also helped launder more than $98 million stolen in June from Harmony Bridge, as well as at least $7.8 million from the August 2022 Nomad Heist.

Following the latest sanction, all property, as well as subsidiaries of Tornado cash in the U.S., will stand blocked. The sanction also banned US citizens from using the platform, with defaulters risking hefty fines for violating the sanctions. In the past, Treasury’s Financial Crimes Enforcement Network (FinCEN) has assessed hefty fines against crypto-mixer-related protocol operators, including a $60 million civil monetary penalty to Larry Dean Harmon, founder of Helix, a darknet-based crypt-mixer, who was accused of laundering over 350,000 bitcoin between 2014 and 2017.

Roman Semenov, the founder of Tornado cash, has maintained that the protocol is entirely decentralized and that its team has little control over it. “Tornado Cash community tries its best to make sure it can be used by good actors by providing compliance tools for example. Unfortunately, it’s technically impossible to block anyone from using the smart contract on the blockchain.” Semenov said.

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