The founders were charged with money laundering and sanctions violations.
Tornado Cash founders have been hit with charges by the US Department of Justice (DOJ) on Wednesday. The charges alleged that the founders helped to launder over $1B in illegal funds through their crypto mixer.
Tornado Cash founders indicted by the Feds
In a coordinated effort, the US Department of Justice and the Treasury Department have announced indictments against Roman Storm and Roman Semenov. The duo were arrested following charges of money laundering, sanctions violations, and operating an unlicensed money transmitting business.
Storm was arrested on Wednesday as the US continues to crackdown on illegal money laundering schemes.
“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,” U.S. Attorney Damian Williams said in today’s DOJ announcement.
A list of “Specially Designated Nationals and Blocked Persons” maintained by the Treasury Department’s Office of Foreign Asset Control (OFAC) now includes Semenov in particular. Also, the founder’s eight Ethereum addresses were blacklisted by the OFAC.
The Treasury alleged that the Tornado Cash founders knew that their service was a safe haven for large-scale money launderers and those evading sanctions.
Acting Assistant Attorney General Nicole M. Argentieri said: “Cryptocurrency mixers have become the go-to method for criminals to conceal their ill-gotten gains.”
Read more: Former OpenSea exec convicted of fraud and money laundering in landmark NFT insider trading case
Crypto mixer for launderers
In August 2022, the service was accused if helping to launder more than $7B of crypto since its creation in 2019.
The Treasury claims that among other things, Tornado Cash’s systems were used to launder more than $96M gotten from the heists of the Nomad cryptocurrency enterprise in August and the June Harmony blockchain bridge.
Tornado Cash is also alleged to have assisted North Korean hackers known as the Lazarus Group in hiding the origin of more than $455M in stolen funds this year.
Over the last ten years, The Lazarus Group has been accused of stealing more than $2B in digital assets. The Treasury and the Federal Bureau Of Investigations (FBI) are convinced that North Korea utilizes hacking to generate revenue for its weapons development projects.
The arrest and indictments follow U.S. District Judge Robert Pitman’s ruling on August 17 that the Treasury did not go beyond its powers when it banned Tornado Cash. In September 2022, a group of cryptocurrency investors sued the Treasury, claiming the Treasury overstepped its bounds by banning Tornado Cash.
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