Tornado Cash Founders Face Legal Action Over Money Laundering and Sanctions Violations

A number of charges, including breaches of sanctions and involvement in money laundering, have been brought against the individuals who created the cryptocurrency mixer known as Tornado Cash.

The co-founders of Tornado Cash, Roman Storm and Roman Semenov, have been accused on counts of conspiracy to conduct money laundering, conspiracy to commit sanctions breaches, and conspiracy to run an unlicensed money transmitting company. The charges arise from claims of money laundering, sanctions breaches, and running an unauthorized money transmission service. The indictment was unveiled on August 23, 2023.

Roman Storm has been apprehended in Washington state, while Semenov remains elusive. In August 2022, another co-founder of the firm, Alexey Pertsev, was arrested in the Netherlands on money laundering charges.

The duo is accused of creating, managing, and promoting Tornado Cash. This platform is suspected of facilitating the laundering of over a billion dollars in illegal proceeds. Of significant concern is the claim that the platform processed hundreds of millions for the blacklisted North Korean cybercrime entity, the Lazarus Group.

The United States Attorney for the District of Maryland, Damian Williams, claimed that "while 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."

On August 23, the list of Specially Designated Nationals and Blocked Persons (SDN) maintained by the Office of Foreign Assets Control (OFAC) of the United States Treasury was updated to include Roman Semenov. The OFAC has blacklisted 44 USD Coin (USDC) and Ethereum addresses by the year 2022, which made it impossible for those living in the United States to use Tornado Cash.

Strong reactions have been given by the crypto community in response to these activities. Coinbase provided legal assistance to the six plaintiffs in a case in which they contended that the Treasury Department overstepped its bounds by imposing sanctions on Tornado Cash. A similar action was taken by the advocacy organisation Coin Centre, which filed a lawsuit, and by Representative Tom Emmer of the United States House of Representatives, who questioned the decision in a letter to Treasury Secretary Janet Yellen.

The cryptocurrency sector is being subjected to persistent difficulties and widespread scrutiny, as seen by the legal steps taken against the inventors of Tornado Cash. It is still unknown how regulatory organisations will tackle the many problems that are linked with digital currencies and the platforms on which they are traded as the industry continues to undergo further development.