Tornado Cash co-founders charged with money laundering, sanctions violations

The United States Treasury’s Office of Foreign Assets Control (OFAC) added Roman Semenov, one of the co-founders of the Tornado Cash cryptocurrency “mixer,” to its list of Specially Designated Nationals and Blocked Persons (SDN) on Aug. 23. Another co-founder, Roman Storm, was arrested by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation division in Washington state the same day.

Semenov and Storm are being charged with conspiracy to commit money laundering, conspiracy to commit sanctions violations and conspiracy to operate an unlicensed money-transmitting business in an indictment unsealed on Aug. 23. The first two counts each carry a maximum sentence of 20 years in prison. The money-transmitting charge is punishable by up to five years’ imprisonment.

Semenov remains at large. The third Tornado Cash co-founder, Alexey Pertsev, was arrested in the Netherlands on money laundering charges in August 2022.

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U.S. Attorney for the Southern District of New York Damian Williams said in a statement released by the Justice Department (DOJ):

“As alleged, […] [w]hile publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes.”

The law enforcement actions are a continuation of a U.S. government crackdown on Tornado Cash that began last year. In August 2022, OFAC placed 44 USD Coin (USDC) and Ether (ETH) addresses on the SDN list, effectively preventing U.S. residents from using the service. 

OFAC’s sanctioning of Tornado Cash caused a backlash in the crypto community. Coinbase backed a suit filed by six individuals that alleged the Treasury Department exceeded its authority in sanctioning the mixer. Advocacy group Coin Center filed a similar suit. Pro-crypto member of the U.S. House of Representatives Tom Emmer also wrote a letter to Treasury Secretary Janet Yellen questioning the move.

Both the DOJ and OFAC specifically refer to Tornado Cash’s role in laundering funds of the Lazarus Group, a North Korean-linked hacking group, which is also on the SDN list, but Tornado Cash has been implicated in several other hacks as well. All told, the mixer has laundered over $1 billion in ill-gotten gains, according to DOJ allegations.

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