The U.S. Justice Department (DoJ) charged two founders of the Tornado Cash cryptocurrency mixer business with laundering more than $1 billion in illegal proceeds in an indictment that was unsealed on Wednesday.
Roman Storm and Roman Semenov have both been accused of conspiring to commit money laundering, to violate sanctions, and to run an unregistered money-transfer operation.
According to reports, Storm, 34, was detained in the American state of Washington. Semenov, 35, is still evading capture in Dubai. From promoting and running the programme, they are said to have “made millions of dollars in profits”. Over the course of three years, Tornado Cash is thought to have processed crypto assets valued up to $7 billion.
Days after a U.S. court ruled that Tornado Cash is a separate organisation that can be sanctioned, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions on Semenov and eight bitcoin addresses associated with him.
“The eight addresses […] have processed over $11.5 million in various crypto assets, including TORN, Tornado Cash’s governance token,” Elliptic reported. “Funds from these addresses have been transferred to a number of services, including both centralised and decentralised exchanges,” the statement reads.
According to U.S. Attorney Damian Williams, “Roman Storm and Roman Semenov are accused of operating Tornado Cash and knowingly facilitating this money laundering.” Storm and Semenov “knew that they were assisting hackers and fraudsters conceal the fruits of their crimes even though they publicly claimed to offer a technically sophisticated privacy service.”
A decentralised mixer service called Tornado Cash was developed in 2019 to combine the cryptocurrencies of numerous users in order to conceal the sources and owners of the monies. The goal is to make the transactions anonymous and challenging to track, enticing criminals wanting to cash out their wrongfully acquired wealth.
The two co-founders of Tornado Cash out of the original three have been named as the accused. Alexey Pertsev, the third co-founder, was detained in the Netherlands in August and is currently awaiting trial on charges of money laundering.
Additionally, it is alleged that Tornado Cash did not carry out efficient Know Your Customer (KYC) or anti-money laundering programmes as required by law.
Additionally, it was not listed as a money transmitting entity with the U.S. Financial Crimes Enforcement Network (FinCEN).
The DoJ also blamed Tornado Cash for assisting the Lazarus Group, a well-known North Korean threat actor, in the laundering of hundreds of millions of dollars in April and May 2022, facilitating transactions that violated sanctions.
The news comes a year after Tornado Cash was sanctioned by the U.S. Treasury Department for allegedly giving “material support” to the hacking team and laundering more than $500 million taken during last year’s attacks of Axie Infinity and Harmony Horizon Bridge.
It’s important to note that on September 13, 2019, OFAC imposed sanctions on the Lazarus Group.
North Korea has gained notoriety in recent years for boldly carrying out high-profile cryptocurrency heists, launderating the proceeds using mixing services like Tornado Cash and Sinbad, and then re-directing the money into the nation to support the regime’s development of nuclear and missile technology.
The theft of $3.8 billion from businesses in 2022 was due to crypto-related hacking, according to blockchain analytics firm Chainalysis, of which approximately $1.7 billion was attributable to attacks carried out by the Lazarus Group.
Additionally, the charge comes after Anthony Francis Faulk (also known as “shade”), 26, was sentenced in the United States for his participation in a scheme to defraud and extort more than a dozen cryptocurrency owners through SIM switching attacks. He will likely spend 36 months in jail and make reparations totaling close to $3 million.