Earlier this week, the US Department of Treasury, Office of Foreign Assets Control (OFAC), sanctioned crypto mixer Tornado Cash. OFAC claims that Tornado has been utilized by North Korea and its “malicious cyber activities and money-laundering of stolen virtual currency.” Interestingly, Tornado received some support from the crypto-verse including top crypto advocacy firm Coin Center that defended Tornado because it is a tool and not a person and the sanctions raise “heightened constitutionality concerns”
Today, Tornado.cash is currently offline and the entity’s Twitter account has highlighted everything else that has been turned off or impacted by the sanctions. Tornado is also defending the use of its mixing platform for legal uses.
Here's the list of Tornado Cash resources that were banned
– Tornado Cash @GitHub organization
– personal @GitHub accounts of TC contributors
– all $USDC on Tornado Cash contracts @circlepay
– @infura_io RPC
– @AlchemyPlatform RPC
– https://t.co/SHvgEjTOMV domain @eth_limo
— 🌪️ Tornado.cash 🌪️ (@TornadoCash) August 9, 2022
Meanwhile, FIOD in the Netherlands – the investigative service for fraud and tax violations, announced earlier today that it had arrested a “29-year-old man” who is suspected to be involved in the money laundering that allegedly took place on Tornado Cash.
To quote FIOD:
“In June 2022, the Financial Advanced Cyber Team (FACT) of FIOD started a criminal investigation against Tornado Cash, which is offered on the Internet by means of a decentralized autonomous organization (DAO). A DAO is an organization that does not have a hierarchical decision-making process, for example, by a board. Instead, decisions are made on the basis of members’ votes. The decisions are recorded in a programming code in a so-called ‘smart contract’. The operation of the DAO also takes place using these smart contracts.
FACT suspects that through Tornado Cash has been used to conceal large-scale criminal money flows, including from (online) thefts of cryptocurrencies (so-called crypto hacks and scams). These included funds stolen through hacks by a group believed to be associated with North Korea. Tornado Cash started in 2019, and according to FACT, it has since achieved a turnover of at least seven billion dollars. Investigations showed that at least one billion dollars’ worth of cryptocurrencies of criminal origin passed through the mixer. It is suspected that persons behind this organization have made large-scale profits from these transactions.” [translated]
Most likely, FIOD has coordinated its actions with US authorities because there is much communication between similar government entities.
Back in the crypto-verse and some are bemoaning the arrest as government over-reach.
1/ Today's arrest of a developer for writing privacy-preserving software reminds me of the US government's criminal investigations against PGP developer Zimmermann for "munitions export without a license". Cryptosystems using keys >40 bits were considered munitions.
— Stefan George (@StefanDGeorge) August 12, 2022