Crypto ‘Mixer’ Tornado Cash Is Blacklisted by the Treasury Department

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The Trea­sury Depart­ment on Mon­day pro­hib­it­ed Amer­i­cans from using the cryp­tocur­ren­cy plat­form Tor­na­do Cash, say­ing the ser­vice has helped crim­i­nals laun­der more than $7 bil­lion of vir­tu­al currencies.

The crack­down was the U.S. government’s lat­est effort to rein in the cryp­to indus­try, as law­mak­ers and reg­u­la­tors grow increas­ing­ly con­cerned over the volatil­i­ty of vir­tu­al cur­ren­cies and their role in facil­i­tat­ing hack­ing and oth­er crimes. Call­ing the plat­form a “threat to U.S. nation­al secu­ri­ty,” the Trea­sury Depart­ment placed Tor­na­do Cash on a black­list of enti­ties, mak­ing it ille­gal for Amer­i­cans to send or receive mon­ey using the service.

“Despite pub­lic assur­ances oth­er­wise, Tor­na­do Cash has repeat­ed­ly failed to impose effec­tive con­trols designed to stop it from laun­der­ing funds for mali­cious cyber actors,” Bri­an Nel­son, the under sec­re­tary for ter­ror­ism and finan­cial intel­li­gence, said in a statement.

Crim­i­nals have long used vir­tu­al cur­ren­cies to trans­act anony­mous­ly, exchang­ing dig­i­tal coins for drugs or oth­er illic­it wares. But the anonymi­ty of cryp­to doesn’t pro­vide blan­ket secu­ri­ty: Cryp­to trans­ac­tions are record­ed on pub­licly view­able ledgers called blockchains, allow­ing law enforce­ment offi­cials to fol­low the money.

Plat­forms like Tor­na­do Cash are designed to make that kind of track­ing hard­er. These cryp­to “mix­ers” receive mul­ti­ple streams of trans­ac­tions, then com­bine them to obscure the ori­gin and des­ti­na­tion of the funds. Accord­ing to the Trea­sury Depart­ment, Tor­na­do Cash was used to laun­der more than $455 mil­lion in cryp­to stolen this year by North Kore­an-backed hack­ers called the Lazarus Group.

A mes­sage to Tor­na­do Cash’s offi­cial Twit­ter account was not returned. Roman Semen­ov, one of the company’s three founders, did not respond to a request for comment.

Since its launch in 2019, Tor­na­do Cash has risen to promi­nence large­ly because blockchain records show that hack­ers have used it to move stolen cryp­tocur­ren­cies. In inter­views, Mr. Semen­ov has defend­ed the ser­vice, say­ing the soft­ware pro­tects the pri­va­cy of legit­i­mate cryp­to traders who could be tar­get­ed by kid­nap­pers or thieves.

In a state­ment, the cryp­to advo­ca­cy group Coin Cen­ter crit­i­cized the Trea­sury Department’s announce­ment, argu­ing that Tor­na­do Cash is a neu­tral plat­form “that can be put to good or bad uses like any oth­er technology.”

“It is not any spe­cif­ic bad actor who is being sanc­tioned,” the state­ment said. “Instead it is all Amer­i­cans who may wish to use this auto­mat­ed tool in order to pro­tect their own pri­va­cy while trans­act­ing online.”

As the mar­ket for dig­i­tal cur­ren­cies has grown, the fed­er­al gov­ern­ment has increas­ing­ly cracked down on cryp­to com­pa­nies, which are light­ly reg­u­lat­ed. Teth­er, a sta­ble­coin com­pa­ny, was fined last year by the Com­mod­i­ty Futures Trad­ing Com­mis­sion for mis­state­ments about its reserves, while the Jus­tice Depart­ment brought insid­er-trad­ing charges last month against a for­mer employ­ee of Coin­base, the largest U.S. cryp­to exchange.

The cryp­tocur­ren­cy exchange Krak­en is also under inves­ti­ga­tion by the Trea­sury Depart­ment for pos­si­ble vio­la­tions of U.S. sanctions.

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