Tag: crypto mixer

Tornado Cash Developer Sentenced to 64 Months in Prison on Charges of Laundering $1.2 Billion: Report

The cryptocurrency sector and crypto entrepreneurs have often come under legal scrutiny in recent years. Former FTX CEO Sam Bankman-Fried was sentenced to 25 years in prison in March over charges of fraud, followed by Binance founder Changpeng getting a four-month sentence earlier this month over the exchange’s anti-money laundering activities. Now, Alexey Pertsev, the developer of controversial crypto mixer Tornado Cash, has reportedly been found guilty of laundering unlawful funds via the platform.

According to a report from Crypto Potato, Pertsev, a resident of the Netherlands, now faces 64 months of jailtime. His lawyers have fourteen days to appeal the verdict. Pertsev, a Russian national, has been accused of laundering a total of $1.2 billion (roughly Rs. 18,370 crore).

Crypto mixers like Tordano Cash let people deposit crypto tokens into a common pool of cryptocurrencies. From this common pool, these deposited crypto tokens can be wired into crypto wallets shrouded in secrecy.

Since its launch in 2019, Tornado Cash has found popularity among crypto hackers, scammers, and thieves. In several instances, crypto criminals have used Tornado Cash to move illicit funds around without leaving a trail for authorities to trace.

In March this year, during Pertsev’s trial, prosecutors had blamed the developer for not doing enough to restrict crypto criminals from exploiting the Tornado Cash platform. Retaliating to these claims, Pertsev had reportedly argued that users coming to the platform intentionally wanted to remain anonymous and that he should not be punished for others using a platform he developed.

Many from the crypto community have spoken in Pertsev’s defence. One of them is Raphaël Bloch, co-founder of ‘The Big Whale’ publication. In a tweet published on May 14, Bloch said, “This decision is very dangerous because Pertsev only developed an open-source tool. Condemning him is like condemning a knife or car manufacturer whose users would have behaved in a wrong way.”

Crypto influencer Ryan Sean Adams, who has over 240,000 followers on X, called Pertsev’s sentencing the death of privacy in the European Union (EU).

Many have reacted to the development, calling it an example of centralised systems cracking down on the financial independence and privacy that the crypto sector offers.

In 2022, Tornado Cash had caught the attention of US authorities. The privacy mixer was reportedly accused of laundering illegal funds worth $7 billion (roughly Rs. 57,911 crore). The FBI even suspected that North Korean hackers had used Tornado Cash to run off with stolen cryptocurrencies worth $455 million (roughly Rs. 3,763 crore).

The US Office of Foreign Assets Control (OFAC) imposed sanctions against Tornado Cash in August 2022.

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Tornado Cash Developer Alexey Pertsev to Remain in Jail, Custody Extended by 3 Months

Prison time for Tordano Cash developer Alexey Pertsev has been extended for three more months until his next hearing, which is scheduled for April 21. Till then, Pertsev will continue to be under the custody of the Dutch police. The Tornado Cash platform was sanctioned by the US Treasury last year. The authorities had, at the time, alleged that the platform was being misused for facilitating money laundering via crypto assets for the benefit of cyber criminals.

As Pertsev’s days behind the bars increase again, he has not yet been charged with any crime, CryptoSlate said in its report.

As per the Dutch law, a person can be held in custody up to 110 days without being formally charged in a criminal activity.

Tornado Cash was launched in August 2019. It is a tool that lets people anonymously wire funds to destination wallets from a common pool of tokens.

Hackers and thieves who steal cryptocurrencies often use Tornado Cash to deposit their stolen tokens into a common pool of crypto tokens and then wire their stolen holdings into secret wallets. This completely breaks any trail of the stolen funds, that could have been traced by investigating officers.

The FBI suspects that North Korean hackers have also used the crypto mixer to get away with stolen crypto assets worth $455 million (roughly Rs. 3,763 crore).

Tordano Cash has reportedly been accused of permitting the laundering of illegal funds worth $7 billion (roughly Rs. 57,911 crore). Its arrested developer has had three appeals rejected since he was sentenced to jail.

Meanwhile, Pertsev’s prolonged arrest has infuriated several members of the Web3 community. A petition demanding the release of Pertsev has also been making the rounds and has already garnered over 5,000 signatures.

In January, Web3 builder Chainway launched a new feature called ‘Proof-of-Innocence’, which would reward the holders of the Tron cryptocurrency if they proved that their holdings were not stolen. Tron is the native cryptocurrency of Tornado Cash.

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US Treasury Offers a Way for Users to Recover Funds From Crypto Mixer Tornado Cash

The US Treasury Department has said that residents and citizens in the US can apply for a license to recover any funds they have that are locked in the now-banned Ethereum coin-mixing tool Tornado Cash. The Treasury Department’s move to ban Tornado Cash in August sent the crypto community into a frenzy over privacy and government oversight and left many wondering whether their everyday crypto activity could lead to criminal charges. The Treasury’s Office of Foreign Asset Control (OFAC) also addressed other pressing questions about the implications of its sanctions on Tornado Cash.

The new guidance provides a way for users to lawfully withdraw their funds from the private transaction application by applying for an OFAC license — an authorisation from the OFAC to engage in a transaction that would otherwise be prohibited.

There is currently about $173 million (roughly Rs. 1,400 crore) left sitting in Tornado Cash’s smart contract, at the time of publication, according to DefiLlama. Some of those funds likely belong to users who are worried about the legal repercussions of withdrawing them.

Three plaintiffs with funds in Tornado Cash filed a lawsuit against the Treasury Department last week, arguing that the sanctions had frozen their lawfully deployed assets — a case that may be affected now, since there is an available avenue to withdraw funds.

Following the initial sanctions announcement, anonymous users protested by ‘dusting’, or sending various crypto wallets a small amount of ETH through Tornado Cash, including those of high-profile celebrities. OFAC’s regulations would apply to these transactions, but the OFAC will not “prioritise enforcement” concerning this matter, the guidance stated.

The Tornado Cash website went offline after the sanctions, but the Tornado Cash app can still be accessed through other means. Engaging in any transaction with Tornado Cash remains prohibited for the US citizens and residents.

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Suspected Tornado Cash Crypto Mixer Developer Detained by Dutch Authorities: Details

Dutch authorities on Friday said they had arrested a 29-year-old man believed to be a developer for the crypto mixing service Tornado Cash, which the United States put on its sanctions list this week. The US sanctions announced on Monday followed allegations that Tornado Cash was helping conceal billions in capital flows, including for North Korean hackers.

By mixing cryptocurrencies, the online service makes it possible to conceal the origin or destination of digital payments, increasing their anonymity.

Tornado Cash is one of the largest crypto blenders identified as problematic by the US Treasury.

The Dutch public prosecutor’s office for serious fraud, environmental crime and asset confiscation (FIOD) said Tornado was suspected of having laundered more than $7 billion (roughly Rs. 55,700 crore) worth of virtual currency since it was created in 2019.

Tornado Cash did not reply to a request for comment.

The FIOD said the man, who was not identified, was arrested in Amsterdam on Wednesday. He is believed to have helped facilitate criminal transactions, including “funds stolen through hacks by a group believed to be associated with North Korea.” He faces money laundering charges.

In June the Financial Advanced Cyber Team division of the FIOD started an criminal investigation into Tornado Cash, the statement said. It found Tornado Cash had been used to conceal large-scale criminal money flows, including from (online) thefts of cryptocurrencies.

Further arrests have not been ruled out, prosecutors said.

On Monday, The US Treasury sanctioned zero-knowledge proof-based private transaction protocol Tornado Cash for its complicity in a crypto laundering case.

The digital currency mixing service has allegedly been used to launder more than $7 billion (roughly Rs. 55,700 crore) worth of virtual currency since its creation in 2019, the Treasury said in announcing the enforcement action. That includes the more than $455 million (roughly Rs. 3,618 crore) stolen by the Lazarus Group, a state-sponsored hacker collective with ties to North Korea.

Monday’s move froze any US assets of the crypto mixer and generally bars Americans from dealing with it.

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