Feds Charge Tornado Cash Founders In $1 Billion Alleged Crypto Laundering Scheme—Including Millions For North Korea
Topline
The co-founders of cryptocurrency firm Tornado Cash were arrested Wednesday on charges of money laundering and sanctions violations, the Department of Justice announced, after they allegedly helped people launder $1 billion—including hundreds of millions of dollars for a sanctioned North Korean cybercrime group.
The Thurgood Marshall Federal Courthouse building in Manhattan.
Key Facts
Company co-founders Roman Semenov and Roman Storm were charged with conspiracy to commit money laundering and sanctions violations, as well as conspiracy to run an unlicensed money transmitting business, the Department of Justice announced in a statement on Wednesday.
Storm was arrested Wednesday, according to the DOJ.
Storm, who is from Washington state, and Semenov, a Russian native, allegedly helped to “other criminals launder and conceal funds using cryptocurrency,” Attorney General Merrick Garland said in a statement, following a criminal indictment filed in federal court in Manhattan.
In particular, federal officials accused the leaders of Tornado Cash of knowingly helping North Korean hacking group Lazarus in April and May of last year, even though those transactions were in violation of U.S. sanctions against the group.
Despite “regularly” receiving emails and text messages warning the service had been used to deposit money from crimes such as hacking and fraud, the co-defendants allegedly “took no steps to implement effective” programs to combat money laundering, according to the indictment.
The charges come one year to the day after the Treasury Department’s Office of Foreign Assets Control sanctioned the Ethereum-based mixer for its alleged connection with Lazarus, amid fears the crypto service—which allows users to conceal their transactions through untraceable transfers—aided hackers to launder crypto crime proceeds.
News Peg
The Treasury Department also sanctioned Semenov on Wednesday for his role in the scheme, with Deputy Secretary Wally Adeyemo accusing him of continuing to “develop and promote the service” despite knowing of the laundering scheme and not taking “meaningful steps to reduce its use for illicit purposes.”
Key Background
Tornado Crash was launched in August 2019 as a crypto mixer, a service used to conceal users’ crypto transactions and send the cryptocurrency Ethereum “100% anonymously.” Its co-founders allegedly knew the privacy service was a “haven for criminals to engage in large-scale money laundering and sanctions evasion,” according to the indictment filed on Wednesday. The Treasury Department accused it last year of aiding criminal actors with money laundering since it was founded, including hundreds of millions of dollars allegedly stolen by hackers with the Lazarus Group.
Tangent
Federal officials have cracked down on cryptocurrency firms for alleged sanctions violations in recent months. Last year, crypto exchange Kraken agreed to a $360,000 settlement over allegations it violated U.S. sanctions against Iran for enabling nearly $1.7 million to be transferred to people in Iran between 2015 and 2019. Like other exchanges, Kraken has also faced Securities and Exchange charges in recent months for allegedly skirting securities registration laws. Meanwhile, the Treasury Department designated Swiss crypto mining firm BitRiver AG last year for operating in Russia’s tech sector, accusing it of helping to offset the financial impact of economic sanctions after Moscow’s invasion of Ukraine. Russian crypto exchange Garantex was also designated last year for “willfully disregarding” anti-money-laundering requirements.
Further Reading
Tornado Cash Devs Arrested for Allegedly Helping North Korean Hackers Launder $1B (CoinDesk)
Treasury Sanctions Ethereum-Based Tornado Cash For Allegedly Helping To Launder More Than $7 Billion (Forbes)
