On Wednesday, the co-founders of the virtual currency mixer Tornado Cash were sanctioned by the United States government, only days after a federal court ruled that the agency had the jurisdiction to do so. The Treasury’s Office of Foreign Assets Control sanctioned Russian national Roman Semenov, one of Tornado Cash’s three co-founders, for allegedly assisting the North Korean hacker organization Lazarus Group, among other things.
On the same day itself, the Justice Department unsealed an indictment charging Semenov and Tornado Cash co-founder Roman Storm, both of Auburn, Washington, with conspiracy to conduct money laundering, running an unauthorized money-transmitting company, and other offenses on Wednesday. Storm was apprehended by federal agents in Washington on Wednesday. Semenov is said to be in Dubai.
Tornado Cash and other mixing services blend diverse digital assets, including potentially unlawfully obtained monies alongside legitimately earned funds, in order for illicit actors to conceal the source of stolen funds. In August 2022, Tornado Cash was fined after being accused of laundering billions of dollars in virtual money since its inception in 2019. According to the Justice Department, Tornado Cash enabled more than $1 billion in money-laundering transactions, including hundreds of millions for Lazarus Group, whose illegal operations are said to have aided North Korea’s nuclear weapons and ballistic missile programs.
According to the Treasury, Tornado Cash systems were used to launder more than $96 million from the June 2022 Harmony block-chain bridge theft and the August 2022 Nomad crypto company robbery. Federal authorities also accused Semenov and Storm with breaching Tornado Cash’s penalties.
After a decision by U.S. District Judge Robert Pitman on August 17 that Treasury did not overstep its jurisdiction in punishing Tornado Cash, the sanctions and arrest took place. In September 2022, a group of cryptocurrency investors sued Treasury, claiming that Treasury overstepped its powers by punishing Tornado Cash. The crypto sector was outraged by the fines, claiming that they open the door to limiting Americans’ use of privacy tools.
In August 2022, Alexey Pertsev, Tornado Cash’s third co-founder, was arrested in the Netherlands on money laundering accusations.
In May, the United States sanctioned North Korean digital currency mixing business Blender.io i, alleging that the nation is using it to launder stolen virtual money and facilitate cybercrime. Blender is accused of assisting Lazarus Group in the largest digital currency theft to date, a $620 million digital currency robbery in March.
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