In a significant development, Roman Storm and Roman Semenov, the creators of Tornado Cash, a cryptocurrency privacy mixer, are accused of money laundering and violating sanctions in connection with the mixer’s operations. Roman Storm has previously been detained by the US Department of Justice (DOJ), while Roman Semenov and eight of his controllable Ethereum addresses were sanctioned on Wednesday by the US Treasury Department’s Office of Foreign Asset Control (OFAC).
Following charges that it enabled money laundering activities, notably sizable sums for North Korea’s Lazarus Group, Tornado Cash, a service intended to hide the origins of cash transacted through it, came under examination and was sanctioned by OFAC last year.
According to U.S. Attorney Damien Williams, Tornado Cash and its owners “knowingly facilitated” money laundering by advertising their business as a privacy-focused alternative while supporting hackers and con artists in hiding the proceeds of their illicit operations.
Roman Storm’s attorney, Brian Klein of Waymaker LLP, responded to the accusations by expressing dismay and asserting that the case rested on a “novel legal theory.” He stressed Storm’s assistance with the investigation while reiterating her denial of any involvement in criminal activity.
The difficulties of shutting down a decentralized service have been brought to light by the American government’s activities against Tornado Cash. The open-source code for Tornado Cash has been utilized by programmers to build new platforms with comparable features. Despite being theoretically illegal in the United States, the central blockchain-based software that underpins Tornado Cash is nonetheless useable on the Ethereum network. In order to comply with penalties, important blockchain infrastructure providers like Infura and Alchemy have also banned access to the Tornado Cash app.
The founders of Tornado Cash, including Storm and Semenov, allegedly knew the site would be used for illegal activities but purposefully built it with privacy protections anyhow, according to the DOJ indictment. The indictment asserts that while publicly declaring otherwise, they kept control over Tornado Cash and disregarded anti-money laundering and know-your-customer regulations.
Alexey Pertsev, another co-founder who was detained in the Netherlands last year on suspicion of money laundering and is awaiting prosecution, is also included in the indictment.
Additionally, according to the DOJ, the developers knew that their service was being used to conceal funds from several hacks and thefts, including the BitMart and KuCoin hacks from 2020 and 2021, respectively.
These new changes follow a federal judge’s decision that the sanctions imposed by the Office of Foreign Asset Control against Tornado Cash did not violate the rights of cryptocurrency investors and creators.