Tornado Cash

Tornado Cash, a virtual currency mixer that has laundered more than $7 billion in cryptocurrency since its inception in 2019, was sanctioned on August 8 by the US Department of Treasury’s Office of Foreign Assets Control (OFAC). Furthermore, due to the sanctions, American businesses and individuals are barred from doing business with it.

What is Tornado Cash?

Tornado Cash is an Ethereum blockchain-based virtual currency mixer. The platform allows anonymous transactions by concealing their origin, destination, and counterparties without making any effort to identify their counterparties. Tornado receives several transactions and combines them before sending them to their respective receivers.

Despite their apparent privacy-enhancing function, illegal actors typically use mixers like these to launder money, particularly money taken during large-scale heists.

Reason Behind the Sanction

The US Treasury Department, according to officials, has sanctioned this well-known cryptocurrency service that users may use to conceal their transactions after North Korean hackers used it to conceal their illegal earnings. The platform enables anonymous transactions by combining funds from multiple sources before sending them to the intended recipient.

According to a senior Treasury official speaking at a news conference, Tornado Cash has been used to launder more than $7 billion in virtual money.

Lazarus Group of North Korea

The Lazarus Group, a notorious North Korean hacking organization, has previously been linked to the Harmony Bridge attack. The attack on Harmony depleted the protocol’s funds by $100 million. Despite the network offering a $1 million reward for the funds’ return, the hacking group laundered them through Tornado Cash.

According to the official, the Lazarus Group of North Korea used the program to launder $450 million. According to the official, the Horizon Bridge on the Harmony blockchain, which allows cryptocurrency trade across other blockchains, was hacked in June and used to launder more than $100 million.

Brian Nelson, the Treasury’s undersecretary for financial and terrorist intelligence, issued a statement. He claimed that, despite public assurances to the contrary, Tornado Cash has consistently failed to implement adequate controls to prevent it from regularly laundering money for dangerous cyber actors and lacks fundamental procedures to mitigate its risks.

Consequences of Sanctions

This action prohibits Tornado Cash property and claims of property in the United States or under the ownership or control of US citizens, and they are required to disclose all such property to OFAC. Furthermore, entities owned directly or indirectly by prohibited people in excess of 50% are prohibited.

Transactions within or through the United States, as well as the possession of property or other blocked persons by US citizens, are all illegal unless authorized by an exemption, a general or special license granted by OFAC. These restrictions apply to giving or receiving money, commodities, or services from and from blocked people.


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