According to a statement from the Dutch Fiscal Information and Investigation Service (FIOD), law enforcement officials in Amsterdam arrested an unnamed 29-year-old suspected of developing the ethereum mixing application Tornado Cash. FIOD accuses the suspect of “concealing criminal financial flows and facilitating money laundering through the mixing of cryptocurrencies.”
Four days ago, the U.S. Treasury Department’s watchdog, the Office of Foreign Asset Control (OFAC), banned the ethereum mixing application Tornado Cash and 44 associated Ethereum-based addresses. Now Dutch law enforcement has revealed that FIOD has arrested a 29-year-old unidentified person that is accused of developing Tornado Cash. The press release published by the Dutch authorities notes that the suspect will be brought before a judge and further hints that “multiple arrests are not ruled out.”
Dutch investigators say that since 2019, Tornado Cash recorded a turnover of around $7 billion and law enforcement officials believe “at least one billion dollars’ worth of cryptocurrencies of criminal origin passed through the mixer.” The individual’s identity has not been disclosed by officials in Amsterdam but Dutch authorities stress that “advanced technologies, such as decentralised organisations” are getting extra attention from the FIOD if they are suspected of money laundering practices.
The FIOD press release adds:
It is suspected that persons behind this organisation have made large-scale profits from these transactions.
The arrest follows the OFAC ban announcement that took place on August 8. “The following entity has been added to OFAC’s SDN list: Tornado Cash,” OFAC’s Cyber-related Designation report details. Then a couple of developers who had worked on the open source Tornado Cash codebase via Github got their accounts suspended, and some commits were erased from the software repository. Additionally, centralized crypto business operators like Circle froze addresses that were allegedly associated with OFAC’s Tornado Cash ban.
After the Github suspensions and assets were frozen, an unusual twist happened when an anonymous Tornado Cash user sent small fractions of ethereum (ETH), otherwise known as dusting, to a great number of celebrities and well known companies. Famous people like Snoop Dogg, Steve Aoki, Logan Paul, and Beeple were dusted alongside organizations like the sneaker company Puma and the Ukraine Donation address.
A spokesperson from Puma explained that the company had received a transaction of around 0.075 ether. “Puma has no business relationship with Tornado Cash and had no prior knowledge of the payment. This matter is currently under investigation,” the Puma spokesperson explained to the Wall Street Journal.
The current undersecretary of the Treasury for terrorism and financial intelligence, Brian Nelson, explained on Monday that Tornado Cash failed to comply with regulatory policies.
“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,” Nelson said. “[The] Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them,” the Treasury’s investigator added. U.S. authorities also noted the takedown of the mixer Blender.io.
While Tornado Cash has received a lot of attention from the media, back in May, Blender.io was the first cryptocurrency mixing application sanctioned by OFAC. In the same fashion, OFAC claimed Blender.io was used to regularly facilitate criminal transactions. The Treasury detailed that the North Korean hacking syndicate Lazarus Group used the mixer to obfuscate $620 million in crypto funds stolen from the Ronin bridge hack (Axie Infinity). OFAC associated Tornado Cash transactions with Lazarus Group as well.
OFAC added a few crypto addresses to the SDN list back in April. In addition to Tornado Cash and Blender.io, an American citizen was arrested and sentenced to prison for violating North Korean sanctions. Former Ethereum developer Virgil Griffith was found guilty of one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA). Griffith spoke at a blockchain conference hosted in the Democratic People’s Republic of Korea (DPRK) and Griffith was charged with aiding the enemy after he allegedly gave the DPRK “technical advice on using cryptocurrency and blockchain technology to evade sanctions.”
What do you think about the Tornado Cash situation and the U.S. government’s recent enforcement against the crypto mixing application? Let us know what you think about this subject in the comments section below.