In light of OFAC’s sanctions on Tornado cash, fresh information has been brought to light about bad actors leveraging Tornado Cash’s service. 74.6% of stolen funds (or nearly 300,160 ETH) on the Ethereum network were transferred to the sanctioned cryptocurrency tumbler during the first half of 2022 according to a new report by blockchain security platform SlowMist.
SlowMist’s 2022 Mid-Year Blockchain Security and AML Analysis Report stated “Tornado Cash accounts for the bulk of the initial funding for these security incidents. There have also been reports of withdrawals from exchanges, trading platforms, and personal wallets to fund these security incidents.”
Cryptocurrency mixers have been a major bone of contention for financial regulators across the globe. Tornado Cash has been caught in a fresh wave of controversy because of its connection to North Korean state-backed hacking organization – Lazarus Group. The US Treasury revealed that Lazarus Group was behind some of the biggest attacks in the crypto ecosystem including the Ronin bridge attack, as announced by the United States Federal Bureau of Investigation (FBI).
As a result, Tornado Cash came under fire for enabling billions of dollars worth of stolen funds to be laundered through its platform. Since its creation in 2019, online data speculates that Tornado Cash is has been used to launder more than $7 billion worth of cryptocurrency/digital assets. Earlier this month, the Office of Foreign Asset Control (OFAC) imposed sanctions against the cryptocurrency mixer, immediately banning it’s use by US citizens and businesses.
Following the sanctions, Kraken and USDC stablecoin which are run by a consortium of Circle and Coinbase blocked all accounts linked to Tornado Cash. The sanction by the Treasury watchdog may have prompted many top industry players to block addresses with exposure to the mixer, sparking new discussions on how far companies and protocols will go to comply with regulations set by the government.
Non-profit cryptocurrency policy think tank – Coin Centre is keen on taking the matter to the court. Its main argument is that sanctioning the entire platform is not justified and that OFAC may have exceeded its statutory authority. Kraken CEO, Jesse Powell also believes Github shouldn’t have wiped off Tornado Cash’s code repositories from their platform and added that there are law-abiding users and privacy-seeking citizens whose interests have been jeopardized by the sanctions on Tornado Cash.
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