I thought that the supervision and litigation of Tornado Cash were about to come to an end. Unexpectedly, the U.S. Department of Justice sued two protocol founders this time, and judging from the content of the charges, other DeFi protocols may also be affected.
Tornado Cash co-founder arrested
According to an announcement from the U.S. Department of the Treasury, the Department of Justice has indicted two co-founders, Roman Semenov and Roman Storm, for Tornado Cash’s involvement in providing money laundering services to the North Korean hacker organization Lazarus Group.
Among them, Roman Semenov has been arrested by the FBI and IRS Criminal Investigation Team, and Roman Storm is still at large.
Tornado Cash developer Alexey Pertsev, who was previously arrested by the Dutch Financial Crimes Investigation Agency (FIOD), was described in the Ministry of Justice announcement as the third co-founder, but was not charged.
The Justice Department’s charges against both include:
Conspiracy to launder money
Conspiracy to violate sanctions
Conspiracy to operate an unlicensed money transmission business
Tornado Cash indirectly assists North Korea in developing nuclear weapons
The announcement listed past large-scale attacks in the encryption field, claiming that the Lazarus hacker group used Tornado Cash to launder money in the process, and the funds were used to allow North Korea to develop missiles and nuclear weapons.
March 2022｜Axie Infinity side chain Ronin vulnerability was exploited, resulting in a loss of 173,600 ETH and 25.5 million USDC
August 2022｜Approximately US$100 million was stolen from the public chain Harmony cross-chain bridge
August 2022｜The cross-chain protocol Nomad was decentralized and robbed, losing US$190 million
Deputy Finance Minister Wally Adeyemo pointed out that even though the founders of Tornado Cash knew that the agreement was used for money laundering by the Lazarus Group, they never took any meaningful steps to reduce illegal activities.
U.S. Department of Justice: Disabling services on the front end does not mean protocol compliance
In April 2022, Tornado Cash learned that the Ethereum address related to the Lazarus Group had been sanctioned by the United States, and immediately announced on Twitter that it had cooperated on the front end of the protocol.
However, the Ministry of Justice emphasized that both Roman Semenov and Roman Storm knew very well that users who were familiar with the contract code could easily circumvent front-end sanctions and directly use Tornado Cash through smart contracts. However, the two always ignored the agreement and were used by North Korean criminal groups to launder money. fact.
Tornado Cash uses @chainalysis oracle contract to block OFAC sanctioned addresses from accessing the dapp.Maintaining financial privacy is essential to preserving our freedom, however, it should not come at the cost of non-compliance.https://t.co/tzZe7bVjZt
— Tornado.cash (@TornadoCash) April 15, 2022
The announcement also mentioned that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will host a FinCEN exchange meeting to focus on how to combat North Korea’s abuse of the digital asset ecosystem.
Review of the currency mixing protocol Tornado cash regulatory incident
Starting from August 2022, Tornado cash has experienced a series of regulatory incidents and caused great controversy in the encryption field:
August 8: Tornado.cash was placed on the sanctions list by the U.S. Office of Foreign Assets Control (OFAC)
August 9: Tornado.cash founder GitHub suspended
August 12: Developer Alexey Pertsev arrested
August 20: Mining pools and protocols began to cooperate with the review and stopped packaging related transactions
September 14: The U.S. Treasury Department responded, agreeing to consider individual transactions. User transactions do not involve sanctions and can apply to retrieve stranded funds.
April 2023: After eight months, the developer of Tornado Cash was reportedly released and placed under home confinement, and TORN increased by more than 30%
August 2023: Tornado Cash supporters’ appeal fails, U.S. judge: Treasury Department sanctions are not ultra vires
This article Tornado Cash co-founder was arrested, US Department of Justice: Indirectly assisting North Korea in developing nuclear weapons first appeared on Chain News ABMedia.