U.S. Treasury Lifts Sanctions on Crypto Mixer Tornado Cash: Implications and Developments
TL;DR
The U.S. Treasury has lifted sanctions against the cryptocurrency mixer service Tornado Cash, which was previously accused of aiding North Korea’s Lazarus Group in laundering illicit funds. This decision highlights the evolving legal and regulatory landscape of digital assets and financial sanctions.
U.S. Treasury Lifts Sanctions on Tornado Cash
The U.S. Treasury Department has removed sanctions against the cryptocurrency mixer service Tornado Cash. Initially sanctioned in August 2022, Tornado Cash was accused of facilitating money laundering for cybercriminals, including North Korea’s Lazarus APT Group.
Background on Tornado Cash and Sanctions
Crypto mixers like Tornado Cash are crucial tools for cybercriminals engaged in money laundering. Since its inception in 2019, Tornado Cash has been used to launder over $7 billion in virtual currency. Notably, the Lazarus Group used it to launder $455 million from one of the largest virtual currency heists to date. Additionally, Tornado Cash was implicated in laundering funds from the Harmony Bridge Heist and the Nomad crypto heist.
The sanctions were imposed under Executive Order (E.O.) 13694. The U.S. Treasury’s decision to lift these sanctions comes after a review of the legal and policy issues surrounding the use of financial sanctions in evolving technological environments.
Statement from the U.S. Treasury
The U.S. Treasury highlighted its commitment to countering North Korea’s cyber threats and enforcing sanctions against illicit digital asset activities. In a statement, the Treasury warned against transactions that aid cybercriminals or North Korea, urging caution to avoid associated risks.
Secretary of the Treasury Scott Bessent emphasized the importance of securing the digital asset industry from abuse by illicit actors, stating:
“Digital assets present enormous opportunities for innovation and value creation for the American people. Securing the digital asset industry from abuse by North Korea and other illicit actors is essential to establishing U.S. leadership and ensuring that the American people can benefit from financial innovation and inclusion.”
Removal of Ethereum Wallet Addresses from SDN List
The U.S. Treasury also removed over 100 Ethereum (ETH) wallet addresses from the Specially Designated Nationals (SDN) list. The SDN list includes individuals and entities blocked from doing business in the U.S. due to involvement in activities such as terrorism, drug trafficking, cybercrime, human rights violations, and the proliferation of weapons of mass destruction.
Legal Actions and Developments
In August 2023, the U.S. Justice Department charged two Tornado Cash founders, Roman Storm and Roman Semenov, with conspiracy to commit money laundering and violations of the International Economic Emergency Powers Act. They face up to 20 years in prison for these charges and an additional 5 years for operating an unlicensed money-transmitting business.
Despite the sanctions, the Lazarus Group allegedly resumed using Tornado Cash in March 2024 to launder $23 million. Blockchain cybersecurity firm Elliptic linked this activity to the theft of $112.5 million from the exchange HTX in November 2023.
Arrest and Sentencing of Tornado Cash Developer
In May 2024, Alexey Pertsev, a main developer of Tornado Cash, was sentenced to 64 months in prison for helping launder over $2 billion worth of cryptocurrency. Pertsev was arrested in Amsterdam in August 2022 and accused of concealing criminal financial flows and facilitating money laundering. The Financial Advanced Cyber Team (FACT) speculated that Tornado Cash had been used to conceal large-scale criminal money flows.
Conclusion
The lifting of sanctions against Tornado Cash underscores the complexities of regulating digital assets and financial sanctions in a rapidly evolving technological landscape. As the U.S. Treasury continues to enforce measures against illicit activities, the future of cryptocurrency mixers and their role in cybercrime remains a critical area of focus for regulators and law enforcement agencies worldwide.
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