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A 29-year-old man has been arrested in the Netherlands suspected of “facilitating money laundering” through the sanctioned protocol Tornado Cash.

In a statement on Friday, the Dutch Fiscal Information and Investigation Service (FIOD) said the man is “suspected of involvement in concealing criminal financial flows and facilitating money laundering.”

FIOD Investigation into Tornado Cash

The FIOD revealed that their Financial Advanced Cyber Team (FACT) started a criminal investigation into Tornado Cash – an Ethereum mixer – in June 2022.

They stated:

“FACT suspects that through Tornado Cash has been used to conceal large-scale criminal money flows, including from (online) thefts of cryptocurrencies (so-called crypto hacks and scams). These included funds stolen through hacks by a group believed to be associated with North Korea.

“Tornado Cash started in 2019 and according to FACT it has since achieved a turnover of at least seven billion dollars. Investigations showed that at least one billion dollars’ worth of cryptocurrencies of criminal origin passed through the mixer. It is suspected that persons behind this organisation have made large-scale profits from these transactions.”

FIOD also revealed that decentralised autonomous organisations (DAOs) will be receiving “extra attention” from them in the future.

CoinDesk later reported that FIOD had revealed to them that the suspect was brought before a judge in Den Bosch at 11.30am local time on Friday morning.

The announcement of the arrest saw holders flock to sell TORN, with prices dropping from around $17 to less than $13.50.

Why was Tornado Cash Sanctioned?

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Tornado Cash is an Ethereum mixer that was sanctioned by the US Treasury this week amid allegations that more than $7 billion in cryptocurrency from hacks, scams and other cyber crime has been laundered on it since 2019.

The service makes it possible to conceal the origin or destination of crypto assets by pooling funds and then redistributing them to obfuscate the transaction, increasing anonymity.

Earlier this week, Brian E. Nelson, under secretary of the Treasury for terrorism and financial intelligence said:

“Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks.”

The arrest also comes off the back off blockchain analysis group Elliptic revealing cross-chain bridge network RenBridge has seen more than $500 million laundered through its platform since 2020.

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