US Treasury punishes Tornado Cash, said to have laundered stolen cryptocurrency

As a result of Tornado Cash’s involvement in allowing billions of dollars in cryptocurrencies to be laundered, the United States has sanctioned the decentralised mixing service.

In return for a charge, Tornado Cash and other mixers like AlphaBay allow clients to hide the source of their crypto money while engaging in a transaction. It conceals the origin and final destination of bitcoin assets by mixing them with monies from other sources that may be contaminated or recognisable.

U.S. people and corporations are now prohibited from using Tornado Cash after the Office of Foreign Asset Control (OFAC), a Treasury watchdog, approved the restrictions on Monday, thereby barring them from doing so.

There has been a total of 7 billion in virtual money laundered via Tornado Cash, according to the Treasury. North Korea-backed hacker organisation Lazarus, which has previously been sanctioned by the United States, is included in this total. After the loss of 625 million in bitcoin from Axie Infinity’s popular play-to-win game Ronin Network, the U.S. tied Lazarus to the theft of 100 million from Harmony’s Horizon bridge. Ransomware has long been used by North Korea to raise money for its nuclear weapons development.

At least 7.8 million in stolen crypto monies were laundered via Tornado during the Nomad heist, which led to a cybercriminals exploiting a basic flaw to steal 100 million in crypto assets, including Ethereum (ETH), Binance Coin, Tether (USD), and Dai (DAI).

Treasury Under Secretary Brian E. Nelson noted that “despite public pledges otherwise, Tornado Cash has consistently failed to implement sufficient controls aimed to preclude it from laundering money for harmful cyber actors on a regular basis and without basic safeguards to address its risks.” To combat mixers that help criminals launder virtual money, Treasury said it will keep up the pressure.

Zcash’s open source research led to the creation of Tornado Cash in 2019, according to its website. While the tool’s co-founder, Roman Semenov, said that “the protocol was expressly created this way to be unstoppable,” he underlined the tool’s decentralised nature.

Tornado isn’t the first bitcoin mixer that’s gotten into trouble with authorities for helping people engage in unlawful conduct. An individual who ran a similar firm named Helix was detained by the US Department of Justice in February last year for his participation in laundering 300 million.

Another service utilised by the Lazarus Group to launder bitcoin obtained after hacking the Ronin bridge on play-to-earn video game Axie Infinity in April was sanctioned back in May by the US Treasury. It seems possible that both Tornado Cash and Blender.io were used to help hide a 625 million hack, even though Tornado was never sanctioned and today’s OFAC notice did not identify the Axie-linked heist.