US Treasury Department Levies Sanctions Against Crypto Mixer Tornado Cash for Being Used to Launder Money

Proceeds from several hacks have traveled through mixers including Tornado Cash.

US Treasury Department Levies Sanctions Against Crypto Mixer Tornado Cash for Being Used to Launder Money

Photo Credit: Tornado Cash

Tornado Cash has been the go-to mixer for cybercriminals

  • The Treasury Department has banned all Americans from using Tornado Cash
  • The OFAC also sanctioned, a similar mixing service
  • Tornado Cash has been a key tool for the Lazarus Group

The US Treasury has sanctioned zero-knowledge proof-based private transaction protocol Tornado Cash for its complicity in a crypto laundering case. The digital currency mixing service has allegedly been used to launder more than $7 billion (roughly Rs. 55,672 crore) worth of virtual currency since its creation in 2019, the Treasury said in announcing the enforcement action. That includes the more than $455 million (roughly Rs. 3,618 crore) stolen by the Lazarus Group, a state-sponsored hacker collective with ties to North Korea.

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 decentralised 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.

As a result of the fresh 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.

The US Treasury's sanction against Tornado Cash comes after the department took similar action against mixer in May. According to reports, allegedly processed a small fraction of the $620 million (roughly Rs. 4,932.8 crore) in ETH and USDC stolen from Axie Infinity's Ronin Bridge.

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