Tornado Cash Developer is Arrested in Amsterdam

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On August 10, the Dutch Crime Agency (FIOD) announced the arrest of a 29-year-old devel­op­er of Tor­na­do Cash, a cryp­tocur­ren­cy mix­er built on the Ethereum net­work that was sanc­tioned ear­li­er this month by the U.S. Trea­sury Department.

The U.S. banned Tor­na­do Cash because the plat­form had a large-scale cur­ren­cy laun­der­ing lend­ing poten­tial and helped anonymize the funds of sev­er­al indi­vid­u­als linked to crim­i­nal activities.

Accord­ing to the FIOD, the sus­pect is alleged­ly involved in crimes of con­ceal­ing illic­it finan­cial flows and facil­i­tat­ing mon­ey laundering.

Tornado Cash Facilitated Money Laundering Activities

The FIOD not­ed that cryp­tocur­ren­cy mix­ers tend to facil­i­tate mon­ey laun­der­ing, as these plat­forms are main­ly used to increase anonymi­ty in finan­cial transactions.

“Tor­na­do Cash is a mix­ing ser­vice for cryp­tocur­ren­cies. The online ser­vice makes it pos­si­ble to con­ceal the ori­gin or des­ti­na­tion of cryp­tocur­ren­cies. The (crim­i­nal) ori­gin of the cryp­tocur­ren­cies is often not or hard­ly checked by such mix­ing ser­vices. Users of a mix­ing ser­vice most­ly do this to increase their anonymity.”

Tor­na­do Cash has been under inves­ti­ga­tion since June 2022 by the FIOD due to its pos­si­ble links with crim­i­nal orga­ni­za­tions like the state-fund­ed hack­ing group Lazarus. How­ev­er, as a pro­to­col, it would be hard to sanc­tion because its gov­er­nance deci­sions are made in con­sen­sus through a DAO (decen­tral­ized autonomous orga­ni­za­tion) with no cen­tral enti­ty behind it.

This has been a mat­ter of con­cern for the law enforce­ment agen­cies, since the cim­i­nal activ­i­ty linked to cryp­tocur­ren­cy mix­ers reach an all-time hig this year as report­ed by Cryp­topota­to.

The Crypto Community Reacts

Fol­low­ing the arrest of the alleged devel­op­er of Tor­na­do Cash, sev­er­al voic­es in the cryp­to com­mu­ni­ty, defend­ers of data pri­va­cy, protest­ed against the news, stat­ing that it was an out­rage against the pro­gram­mers who, despite devel­op­ing code, do not retain com­plete con­trol of the platform.

Stephan Liv­era, a Bit­coin pod­cast host and writer for Bit­coin Mag­a­zine, said that the arrest of this per­son was “dis­turb­ing news,” because, just like road builders who build roads used by crim­i­nals when they dri­ve their cars, coin mix­ers are not made with a crim­i­nal pur­pose in mind, even though crim­i­nals use it.

Liv­era left open the ques­tion of why they had actu­al­ly arrest­ed this devel­op­er, whether it was for writ­ing the Tor­na­do Cash pro­gram­ming code or because he was involved in some­thing else. Tom Robin­son, Cofounder of the blockchain foren­sics firm Ellip­tic also shared sim­i­lar concerns.

Jake Chervin­sky, a lawyer and head of pol­i­cy at the Blockchain Asso­ci­a­tion, said he had spent the whole week look­ing into the case. Yet, so far, he had not “heard a sat­is­fac­to­ry jus­ti­fi­ca­tion” that would allow the devel­op­er to be arrest­ed, with author­i­ties only indi­cat­ing that crim­i­nals were using the plat­form heavily.

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