The cryptocurrency world is abuzz with the recent indictment of Tornado Cash's co-founders. Facing serious allegations of money laundering and sanctions violations, the duo's actions have sent ripples through the crypto community.
Dive in to understand the gravity of the charges, the U.S. government's broader crackdown, and what this means for the future of cryptocurrency.
Contents
Introduction
In a recent turn of events, the co-founders of Tornado Cash, a cryptocurrency mixer, face serious allegations. Roman Semenov and Roman Storm, the brains behind the platform, are now under the scrutiny of U.S. authorities.
This article delves into the charges against them, the implications for the crypto community, and the broader crackdown on Tornado Cash.
U.S. Treasury's Actions
On August 23rd, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) added Roman Semenov, one of the co-founders of Tornado Cash, to its Specially Designated Nationals and Blocked Persons (SDN) list.
On the same day, another co-founder, Roman Storm, was arrested in Washington state by the Federal Bureau of Investigation and the U.S. Internal Revenue Service's Criminal Investigation Division.
According to the indictment released on August 23rd, Semenov and Storm are charged with money laundering, sanctions violations, and conspiracy to operate an unlicensed money transmitting business.
The first two charges could result in a sentence of up to 20 years each, while the latter could lead to a maximum of 5 years in prison.
While Semenov remains at large, Alexey Pertsif, the third co-founder of Tornado Cash, was arrested in the Netherlands in August 2022 on charges of money laundering.
Prosecutor's Statement
Damian Williams, the U.S. Attorney for the Southern District of New York, stated in a release from the Department of Justice (DOJ),
"While they claimed to offer a technically sophisticated privacy service, in reality, Storm and Semenov knew they were aiding hackers and fraudsters in concealing the proceeds of their crimes."
These enforcement actions are part of a larger crackdown on Tornado Cash initiated by the U.S. government. In August 2022, OFAC added 44 USD Coin (USDC) and ETH addresses to the SDN list, effectively barring U.S. residents from using the service.
Community Backlash
The sanctions against Tornado Cash by OFAC sparked outrage within the cryptocurrency community. Coinbase backed a lawsuit filed by six individuals claiming that the Treasury acted beyond its sanctioning authority.
Similarly, an advocacy group named Coin Center filed a lawsuit. Pro-cryptocurrency Congressman Tom Emmer also expressed his concerns by sending a letter to Treasury Secretary Janet Yellen.
Ties to North Korea
Both the DOJ and OFAC have identified Tornado Cash's involvement in laundering funds for the Lazarus Group, a hacking group linked to North Korea. While this group is also on the SDN list, Tornado Cash is believed to be involved in several other hacking incidents.
According to the DOJ's charges, the mixer has laundered over a billion dollars in illicit gains.