By
Chimamanda U. Martha
April 17th, 2024
On Monday, the US Treasury blacklisted Tornado Cash for allegedly helping to launder about $7 billion worth of cryptocurrencies.
The US Treasury has sanctioned digital currency mixing service Tornado Cash for its complicity in a crypto laundering case. According to the federal government monetary department, Tornado Cash has laundered more than $7 billion in crypto since its inception in 2019. Citing specific examples, the Treasury Department mentioned that the North Korean state-sponsored hacker collective, Lazarus Group, laundered over $455 million using Tornado Cash. This illegal conversion occurred soon after the group hacked Harmony Bridge back in June. Another example is last week’s Nomad Bridge Hack where criminals allegedly used Tornado Cash to launder at least $7.8 million of stolen funds.
Speaking on the development, Brian Nelson, undersecretary of the Treasury for Terrorism and Financial Intelligence, explained:
“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks.”
As a result, the US Treasury watchdog, the Office of Foreign Asset Control (OFAC), has prohibited citizens and businesses from using Tornado Cash. In addition, Nelson also suggested that the department’s latest sanctions against a mixer would not be the last. As he put it:
“Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”
Tornado Cash, alongside other mixers including AlphaBay, facilitates the concealment of customer crypto transactions in exchange for a fee. The decentralized Ethereum-based mixing service achieves this by blending potentially identifiable funds with others. Mixing services obscure the source of the digital currencies as well as shroud their eventual destination.
Implication of US Treasury Sanction on Tornado Cash
As a result of Monday’s sanction, Tornado Cash’s website and a long list of Ethereum addresses have now been added to the Treasury department’s Specially Designated Nationals list. Among these banned addresses, 44 of them are addresses that receive donations, including one listed as a Gitcoin beneficiary.
Although the Treasury Department puts the total sum of laundered crypto assets through Tornado as $7 billion, others beg to differ. For instance, according to a spokesperson for crypto analytics platform Elliptic, that figure is closer to $1.5 billion. The spokesperson explains that the inflated amount is due to the total value of crypto assets – legitimate and illegitimate, funneled through Tornado. According to the Elliptic spokesperson, the legitimate use of mixers is simply to preserve financial privacy.
Back in April, Tornado Cash said it deployed a tool from blockchain tracker Chainalysis to bar US government-sanctioned wallets. At the time, the company said in a statement that “maintaining financial privacy is essential to preserving our freedom, however, it should not come at the cost of non-compliance.”
However, this gesture by the crypto mixer does not seem to be good enough for US authorities.
The US Treasury’s sanction against Tornado Cash comes after the department took similar action against mixer Blender.io in May. According to reports, Blender.io allegedly processed a small fraction of the $620 million in ETH and USDC stolen from Axie Infinity’s Ronin Bridge.