Tornado Cash Co-founders Charged with Money Laundering Violations, Arrested by FBI

The US Treasury Department noted that even after Tornado Cash founders knew that the Lazarus Group was using the crypto mixer to launder funds, they continued offering hem the services.

American regulators are cracking down hard on popular crypto mixer Tornado Cash. On Wednesday, August 23, the US Department of Treasury imposed sanctions on one of the Tornado Cash co-founders – Roman Semenov – for assisting North Korea’s notorious Lazarus Group.

The US Treasury Department accused Semenov of “providing material support to Tornado Cash and to the Lazarus Group, a state-sponsored hacking group that is an instrumentality of the Democratic People’s Republic of Korea (DPRK)”.

They have also accused Roman Storm, of allegedly laundering money using the crypto mixer Tornado Cash. As a result, the FBI and the IRS arrested Storm on Wednesday itself. In their statement on Wednesday, the US Treasury Department said:

“Tornado Cash has been used to launder funds for criminal actors since its creation in 2019, including to obfuscate hundreds of millions of dollars in virtual currency stolen by Lazarus Group hackers. The Lazarus Group used Tornado Cash to obfuscate the movement of over $455 million stolen in the March 2022 attack on Axie Infinity’s Ronin network bridge, the largest known virtual currency heist to date.”

Even after discovering that the Lazarus Group was using its mixing service to launder large amounts of stolen virtual currency, Tornado Cash continued to offer its services to the group, noted the department. It added that the stolen money “provides the DPRK with resources that it uses to support its unlawful ballistic missile and nuclear weapons programs”.

About Tornado Cash

Tornado Cash, a widely recognized mixer in the crypto space, along with many other entities in the cryptocurrency industry, has been facing increased regulatory scrutiny. The US Treasury has also highlighted the use of crypto mixers for laundering stolen funds.

Reportedly, the Lazarus Group, an entity associated with North Korea, utilized Tornado Cash in April and May 2022, bypassing US sanctions. Lazarus used Tornado Cash to conceal the transfer of more than $455 million, stolen in the March 2022 attack on Axie Infinity’s Ronin network bridge, constituting the most extensive virtual currency theft recorded thus far.

Despite this, Storm and Semenov purportedly continued to support these transactions that violated sanctions, as stated in the indictment. However, Storm’s lawyer, Brian Klein said that prosecutors have wrongly accused his client. Speaking to CNN, Klein added:

“We are incredibly disappointed that the prosecutors chose to charge Mr. Storm because he helped develop software, and they did so based on a novel legal theory with dangerous implications for all software developers. Mr. Storm has been cooperating with the prosecutors’ investigation since last year and disputes that he engaged in any criminal conduct.”

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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