Tornado Cash deposits surge despite sanctions, reaching $1.9 billion in 2024.
WazirX hack funded by Tornado Cash, increasing crypto-related illegal activities.
The crypto world has seen an increase in hacks recently, with one notable incident involving the Indian exchange WazirX, which lost nearly $230 million. Each transaction’s caller in this hack was funded by Tornado Cash, a decentralized protocol for private transactions. Tornado Cash has been highly involved in recent hacks and has become a popular destination for illicit activities.
Despite ongoing sanctions and legal issues, Tornado Cash has seen a surprising uptick in deposit volume in the first half of 2024. Research reveals that it received $1.9 billion in deposits during this period. It is a 50% increase from the total deposits in 2023.
Notably, the Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in August 2022 after the North Korean hacking group Lazarus used it to launder around $455 million. As a result, any wallet interacting with it finds extremely difficult to withdraw crypto into fiat on OFAC-compliant centralized exchanges.
Legal Fights
Several crypto industry figures are challenging the Tornado Cash sanctions through a lawsuit first filed in 2022. The plaintiffs argue that sanctioning Tornado Cash is “unlawful and unconstitutional” as the mixing service cannot be viewed as a country or an “entity”. And blocking it violates free speech rights under the US Constitution.
This lawsuit has gained support from several large crypto firms. However, the US Treasury maintains that crypto mixers are a national security threat and that it failed to implement controls to prevent money laundering.
Moreover, the three co-founders of Tornado Cash, Alexey Pertsev, Roman Storm, and Roman Semenov, have faced legal challenges. Pertsev was sentenced to over five years in a Dutch prison for money laundering. Storm was arrested in the US and pleaded not guilty to money laundering charges. He later filed a motion to dismiss all charges.
Meanwhile, the blockchain community believes that shutting down them will not eliminate exploits. But it may make it harder for hackers to cover their tracks. However, attacks against mixers are also seen as limiting the original idea of confidential, decentralized money.
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