Tag: tornado cash

Privacy Pools ‘Zero-Knowledge’ Crypto Mixer Under Development, Former Tornado Cash Developer Says

Privacy Pools, a successor to the legally sanctioned crypto mixer Tornado Cash is currently in development. One of the developers who worked on Tornado Cash is now creating a new platform that is said to be compliant with legal norms. The developer has posted the code of the new service on GitHub. With this platform, the developer aims to provide services similar to Tornado Cash, but with a more legal-friendly approach. The code posted on GitHub is only experimental, as per the developer.

The upcoming Privacy Pools service will use zero-knowledge proofs enable its users seeking more privacy in their crypto transactions, to prove that they are not associated with terror or hacking groups, according to former Tornado Cash developer Ameen Soleimani. Privacy mixers like Tornado Cash are often misused by crypto thieves.

These mixers allow people to deposit their stolen tokens into a common pool of crypto tokens and then wire their stolen holdings into secret wallets. This process is designed break any trail of the stolen funds, that could have been traced by officers investigating a crypto scam or fraud case.

Last year, Tornado Cash caught the attention of US authorities. The privacy mixer reportedly laundered illegal funds worth $7 billion (roughly Rs. 57,911 crore).

The FBI even suspects that North Korean hackers have used Tornado Cash to escape with stolen cryptocurrencies worth $455 million (roughly Rs. 3,763 crore). Meanwhile, the US Office of Foreign Assets Control (OFAC) imposed sanctions against Tornado Cash in August last year, for illegally laundering money via crypto assets.

Alexey Pertsev, the brains behind Tornado Cash is currently serving jail time under the supervision of the Dutch police without being charged with any crime.

The percentage of funds passing through crypto mixers from the custody of cybercriminals reportedly touched $51.8 million (roughly Rs. 413 crore) in April 2022. This marked the highest volume of crypto funds so far to have been wired to destination wallets via crypto mixers.

While law enforcement agencies in the US are already tightening noose around crypto privacy mixers, blockchain security firms like Chainalysis are working on bringing out tools that can reverse-engineer and demix transactions processed via crypto mixers.

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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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Tornado Cash Users to Get Benefits for Proving Their Funds Are Not Stolen, Here’s How

Holders of the TORN token, which is native to the Tornado Cash privacy mixer, will now be eligible to earn rewards for proving that their holdings are not from stolen funds. Web3 builder Chainway has launched a new feature called the ‘Proof-of-Innocence’, which will reward ethical TORN holders. The Tornado Cash platform is often misused by scammers and thieves to anonymously rewire stolen funds by depositing their holdings in an anonymous pool of tokens first.

TORN holders will be able to trigger this protocol as and when they wish to withdraw their funds from the Tornado Cash protocol.

“Proof of Innocence is a tool that allows users to prove that their withdrawals from Tornado Cash are not from a list of specified deposits, selected by the user themselves. This allows users to clear their name and demonstrate their innocence without revealing their identity,” Chainway wrote in an official post.

Currently, over 1.09 million TORN coins are in circulation. As per CoinMarketCap, the total market valuation of TORN stands at over $7 million (roughly Rs. 60 crore).

TORN holders, who wish to use the proof-of-innocence to earn benefits, would be able to withdraw by providing ‘zero knowledge’ proof. Zero-knowledge proofs can be provided without disclosing the original address of the users’ funds.

People who clear the process will not only get additional layers of anonymity and privacy, but will also prove that they are not notorious actors. “This allows users to clear their name and demonstrate their innocence without revealing their identity,” the Chainway blog added.

For now, Chainway’s proof-of-innocence mechanism only works on Tornado Cash. The protocol is available on GitHub, a CryptoSlate report noted.

“By providing this proof, users can show that they are not hackers or other bad actors, and can make withdrawals from Tornado Cash with confidence. This not only improves the security and trustworthiness of the system, but also helps to protect legitimate users from being associated with illegal activities, without sacrificing their privacy,” the post noted.

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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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US Treasury Department Levies Sanctions Against Crypto Mixer Tornado Cash for Being Used to Launder Money

The US Treasury has 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. 55,672 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.

Speaking on the development, Brian Nelson, undersecretary of the Treasury for Terrorism and Financial Intelligence, explained, “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks.”

As a result, the US Treasury watchdog, the Office of Foreign Asset Control (OFAC), has prohibited citizens and businesses from using Tornado Cash. In addition, Nelson also suggested that the department’s latest sanctions against a mixer would not be the last. As he put it, “Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”

Tornado Cash, alongside other mixers including AlphaBay, facilitates the concealment of customer crypto transactions in exchange for a fee. The decentralised Ethereum-based mixing service achieves this by blending potentially identifiable funds with others. Mixing services obscure the source of the digital currencies as well as shroud their eventual destination.

As a result of the fresh sanction, Tornado Cash’s website and a long list of Ethereum addresses have now been added to the Treasury department’s Specially Designated Nationals list.

The US Treasury’s sanction against Tornado Cash comes after the department took similar action against mixer Blender.io in May. According to reports, Blender.io allegedly processed a small fraction of the $620 million (roughly Rs. 4,932.8 crore) in ETH and USDC stolen from Axie Infinity’s Ronin Bridge.

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