Tornado Cash founders charged with money laundering

Two co-founders of crypto mixer Tornado Cash have been indicted by a US court for money laundering.

Roman Storm, a naturalised US citizen, was arrested on Wednesday, while his co-founder Roman Semenov, has yet to be taken into custody.

The US Department of the Treasury’s Office of Foreign Assets Control has sanctioned Semenov, blocking Semenov’s assets in the US and barring US-based and foreign organisations from engaging in financial transactions with Semenov

Both founders are being charged with a total of three conspiracy counts: conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitter.

According to US officials, Tornado Cash facilitated more than US$1 billion in money laundering transactions and laundered “hundreds of millions of dollars” for the Lazarus Group, a North-Korean backed cybercrime group known for some of the largest financial crimes in the world, including the Ronin Bridge hack and the Bangladesh Bank Heist.

Tornado Cash is a cryptocurrency mixer, which collects, pools, and shuffles the cryptocurrencies deposited by many different users. The result is that it can be extremely difficult to trace cryptocurrencies that have been mixed, and makes it easier for users to conceal the source of their funds.

Acting Assistant Attorney-General Nicole Argentieri stated that because of this, cryptocurrency mixers have become the “go-to method for criminals to conceal their ill-gotten gains.”

She also added that Storm and Semenov “operated Tornado Cash as a safe haven for criminal actors to obfuscate the trail of funds tied to their criminal activities, such as computer hacking and wire fraud”.

Tornado Cash apparently operated without the standard know-your-customer or anti-money laundering protocols, and according to the indictment, the founders took no steps to implement such protocols either.

Storm’s lawyer Brian Klein has spoken up, stating that Storm disputes having engaged in any criminal conduct and has been cooperating with prosecutors’ investigation.

The third co-founder of Tornado Cash, Alexey Pertsev, had previously been detained by Dutch law enforcement officials on money laundering charges in August last year.

This recent case is not the only legal setback that Tornado Cash has faced.

Tornado Cash was blacklisted by the Office of Foreign Assets Control last year, and earlier this month, a Coinbase-backed challenge to remove sanctions on Tornado Cash failed when a federal judge ruled that the Treasury Department was within its rights to sanction the mixer.