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According to a statement from the Dutch Fiscal Information and Investigation Service (FIOD), police authorities in Amsterdam arrested an unnamed 29-year-old suspected of developing the Ethereum mingling application Tornado Cash. FIOD accuses the suspect of “hiding criminal financial flows and facilitating money laundering through the mixing of cryptocurrencies”.
Four days ago, the US 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 police have revealed that the FIOD has arrested a 29-year-old unidentified person 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 suggests that “more arrests are not excluded”.
Dutch investigators say that since 2019, Tornado Cash has recorded a turnover of about $7 billion, and law enforcement officials believe that “at least one billion dollars worth of cryptocurrencies of criminal origin passed through the mixer.” The identity of the individual has not been revealed by officials in Amsterdam, but Dutch authorities stress that “advanced technologies, such as decentralized organizations” receive extra attention from the FIOD if they are suspected of money laundering practices.
FIOD’s press release adds:
It is suspected that people behind this organization have profited on a large scale from these transactions.
The arrest follows the announcement of the OFAC ban that took place on August 8. “The following entity has been added to OFAC’s SDN list: Tornado Cash,” details OFAC’s Cyber-related Designation report. Then a couple of developers who had been working on the open source Tornado Cash codebase via Github had their accounts suspended and some commits were deleted from the software repository. In addition, centralized crypto business operators such as Circle froze addresses allegedly associated with OFAC’s Tornado Cash ban.
After the Github suspensions and asset freezes, an unusual twist occurred when an anonymous Tornado Cash user sent tiny fractions of ethereum (ETH), otherwise known as dust, to a large number of celebrities and well-known companies. Celebrities such as Snoop Dogg, Steve Aoki, Logan Paul and Beeple were dusted along with organizations such as the sneaker company Puma and the Ukraine Donation address.
A Puma spokesperson 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 Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian Nelson, explained on Monday that Tornado Cash did not follow regulatory guidelines.
“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 fundamental measures to manage the 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 Department investigator added. US authorities also noted the removal of mixer Blender.io.
While Tornado Cash has received a lot of media attention, back in May, Blender.io was the first cryptocurrency blending application to be sanctioned by OFAC. Similarly, OFAC claimed that Blender.io was used to regularly facilitate criminal transactions. Treasury detailed that the North Korean hacking syndicate Lazarus Group used the mixer to hide $620 million in crypto funds stolen from the Ronin bridge hack (Axie Infinity). OFAC associated Tornado Cash transactions with the 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, a US 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). Speaking at a blockchain conference held in the Democratic People’s Republic of Korea (DPRK), Griffith was charged with aiding the enemy after he allegedly provided the DPRK with “technical advice on the use of cryptocurrency and blockchain technology to avoid sanctions.”
What do you think about the Tornado Cash situation and the US government’s recent enforcement against the crypto mixing application? Let us know what you think about this topic in the comments section below.
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