Dutch authorities arrest suspected developer of crypto mixer Tornado Cash
Dutch financial crime authorities have arrested a man suspected of helping to develop Tornado Cash, the crypto-mingling service that has been sanctioned by the United States for alleged money laundering.
The arrest by the Fiscal Information and Investigation Service (FIOD) was announced on Friday, but the agency said it took place on Wednesday in Amsterdam. The 29-year-old was suspected of having participated in hiding criminal money flows and facilitating money laundering through Tornado, it says.
The FIOD’s move comes just days after the US Treasury Department imposed sanctions on the crypto-mingling service, stepping up efforts to crack down on crypto tools that could be used to evade sanctions or commit broader financial crimes.
Earlier this week, the US Treasury Department said Tornado Cash was used to launder more than $7 billion of illicit funds, including $455 million stolen by the Lazarus Group, a state-backed North Korean cybercriminal group.
Regulators are focusing on the role of so-called compounding services in crypto markets because they break the payment trails that would typically be available through the digital ledgers that underlie cryptocurrencies. Tornado is designed to be decentralized and operated without a traditional corporate structure.
The Dutch agency said it had opened a criminal investigation involving Tornado Cash in June. The FIOD said its financial advanced cyber team suspected the platform had been used to “conceal large criminal cash flows”, including funds stolen by a “group believed to be associated with North Korea”.
FIOD added that more arrests were not ruled out.
Tornado Cash’s troubles mark a new front in global government efforts to rein in decentralized and anonymity-enhancing technologies popular in the crypto industry.
In May, the US Treasury Department sanctioned another crypto-blending service called Blender.io, then the first entity of its kind to be sanctioned by the Office of Foreign Assets Control. The US government said the crypto-mixing service had been used to process $20.5 million in illicit proceeds.
“If you look at this blending ability . . . everybody [the government] doing is getting into the crypto supply chain to say, look, it can be used for good, for privacy, right, but it can also be used for bad, that’s what’s alarming, said Bill Conner, executive chairman of SonicWall , an American cybersecurity group.
But the crackdown on anonymity-promoting mixers has angered financial privacy advocates.
“The fact that a technology can be used to break the law does not mean that there is anything wrong with that technology. Criminals have long used cash to commit crimes, said Marta Belcher, a cryptocurrency and civil rights attorney and special counsel to the Electronic Frontier Foundation.
