The Ethereum-built crypto mixing service has been sanctioned by the Treasury Department for its involvement in a money laundering case.
On Monday, the US Department of Treasury issued a sanction against the popular cryptocurrency mixer Tornado Cash, preventing American citizens from interacting with it over the company's alleged laundering of proceeds of cybercrimes. The US Treasury Department required that all of Tornado Cash's American assets be reported to the Office of Foreign Assets Control.
According to The Verge, the US Treasury made the announcement on Monday through a press release that detailed how Tornado Cash engaged in crypto money laundering that came from cybercrime, specifically those linked to hacking groups in North Korea.
Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in a statement that Tornado Cash "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."
How Crypto Money Mixers Work
Crypto money mixers such as Tornado Cash are designed to conceal the source of the crypto money when participating in a transaction by combining a person's tokens with a pool of other individuals' assets on the platform. It effectively blends potentially identifiable or questionable crypto money with others to obfuscate the real source and destination of such assets, allowing for easy laundering and cybercrime to flourish.
Some traders use Tornado Cash to legitimately hide their identity and protect their privacy, but the US government said that it fosters illegal activities such as the "facilitation of heists, ransomware schemes, fraud, and other cybercrimes." They added that such virtual currency mixers who aid criminals in carrying out cybercrime are a threat to US national security.
According to CNBC, Elliptic, a blockchain analytics firm, reported that there had been at least $1.5 billion in proceeds from cybercrime such as ransomware, hacks and fraud going through Tornado Cash to be laundered. In addition, the $100 million stolen from the Harmony bridge in June was also laundered through the crypto money mixer.
The US Treasury reported that Tornado Cash was used to launder more than $7 billion worth of cryptocurrency since its beginnings in 2019. The agency committed to cracking down on crypto money laundering by various mixers, as well as the criminals who carry out such schemes.
US Treasury Cracking Down on Crypto Mixers Involved in Cybercrime
The US Treasury revealed that Tornado Cash was also involved in last week's Nomad heist, in which cybercriminals exploited a trivial bug to steal $100 million in crypto assets, TechCrunch reported. Bad actors stole crypto money such as Ethereum, Binance Coin, Tether, USD Coin and Dai. But Tornado Cash isn't the only mixer targeted by the US Treasury lately.
Back in May, similar sanctions had been imposed on another popular crypto money mixer called Blender.io, which had been used by Lazarus Group to launder cryptocurrency that was stolen after the Ronin bridge on the video game Axie Infinity was backed. In February 2021, the US Department of Justice arrested a man for laundering up to $300 million by operating a similar crypto money mixing service called Helix.
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