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U.S. Sanctions Tornado Cash For Alleged Use In Laundering

On Monday the U.S. Treasury Department placed sanctions against the cryptocurrency mixing service Tornado Cash, citing its use by the North Korea-backed Lazarus Group in the high-profile hacks of Ethereum bridges to launder and cash out the ill-gotten money.


Tornado Cash logo


Tornado Cash is a so-called mixer, which blends streams of digital currency to mask their origin and improve anonymity.


To achieve privacy, TC  uses smart contracts that accept token deposits from one address and enable their withdrawal from a different address.Those smart contracts work as pools that mix all deposited assets.


Once the funds are withdrawn by a completely new address from those pools, the on-chain link between the source & the destination is broken. The withdrawn crypto-assets are therefore anonymized.


While tokens are in a Tornado Cash pool, the custody remains in users’ hands. Users, therefore, have complete control over their tokens.


Over the years, Tornado Cash has been used by hackers or criminals to launder large sums of money. 


The US Treasury said the Lazarus Group, a North Korean government-backed group of hackers, has moved at least $455 million through Tornado Cash.


The group is already under US sanctions, having carried out a number of other data breaches, including a hack of Sony Pictures in 2014. 


Tornado Cash was also used to launder about $100 million from a hack of virtual currency firm Harmony in June, the Treasury said.


Pyongyang denies the accusations, and North Korea’s mission to the United Nations in New York has not commented.


Tornado Cash founder Roman Semenov tweeted that his account on code-sharing site GitHub had also been suspended, and asked: “Is writing an open source code illegal now?”



The US Office of Foreign Assets Control (OFAC) has now placed the Ethereum-based privacy protocol on the official sanctions list.


“Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” read the press statement


The statement continued: “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 risk.”


Ethereum founder Vitalik Buterin has come out in defence of Tornado Cash, tweeting that the protocol proved useful in donating to the Ukrainian war effort.


Herein lies one key defence of the protocol: could a platform that allows people to skirt authoritarianism and channel funds to people in need really be so bad?


When weighing up the positives and the negatives, the scales will, undoubtedly, lean to one side or another depending on the individual.


This means the U.S. has a conundrum on its hands, as clearly there are very good reasons to not want North Korea or any other hackers or criminals to be able to freely conceal global financial activity, however is it worth sacrificing the values America appears to stand for? 

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