Tornado Cash Face US Treasury Sanctions Related to Money Laundering Allegations

Tornado Cash Face US Treasury Sanctions Related to Money Laundering Allegations

A bouquet full of sanctions and restrictions delivered by the US Treasury has fallen on Tornado Cash's doorstep. 

Tornado Cash, a cryptocurrency mixing service established by Roman Storm and Roman Semenov, has been facing the United States Treasury Department’s sanctions.

According to the statement shared on August 8th, the U.S. Treasury Department has included 44 crypto addresses related to Tornado Cash to its Specially Designated Nationals list of the Office of Foreign Asset Control (OFAC).

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This list placed 44 USD Coin (USDC) and Ether (ETH) addresses among terrorists and narcotics traffickers, making U.S. residents prohibited to interact with these addresses.

If users choose to ignore these regulations, penalties can be issued from $50,000 to $10,000,000. Moreover, they can receive from 10 to 30 years of imprisonment

Under these sanctions, users cannot work for the projects, visit their websites, send Gitcoin donations, run or download its software, and deposit/withdraws from smart contracts

These restrictions come as a result of claims that the mixer has been involved in multiple money laundering schemes. According to the Treasury, individuals and other groups have used the protocol to launder more than $7 billion worth of crypto since 2019. The institution also claims that the protocol has been involved in a $455 million hack organized by Lazarus Group as well as an attack against Wormhole in February and Horizon Bridge attack in June. 

Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence commented on the issue saying: 

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. The Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.

The problems for Tornado Cash don’t stop there. Following the legal sanctions, USD Coin (USDC) stablecoin issuer Circle has frozen more than 75,000 USDC worth of funds related to 44 crypto addresses placed on the Specially Designated Nationals list. 

Tornado Cash co-founder Roman Semenov has also been affected by these sanctions. Semenov has been suspended from using his GitHub account

It is still unclear why Semenov’s account has been suspended. However, if the co-founder is the owner of one of the 44 crypto addresses affected by restrictions, it would result in limiting access to any business-related websites, including GitHub. 

Gile K. - Crypto Analyst

by Gile K. - Crypto Analyst, BitDegree