US Treasury Department Blacklists Crypto-Mixing Service Tornado Cash Over North Korea Ties

The US Department of the Treasury has added Tornado Cash and specific Ethereum (ETH) and USD Coin (USDC) wallet addresses to the Office of Foreign Asset Control’s (OFAC) list of Specially Designated Nationals (SDN) – a list of individuals and companies owned or controlled by someone working for a targeted country. 

Following news of the sanction, Tornado Cash slumped by 29.35 per cent to rest at $21.67 at 6:00 pm IST.

These virtual currency mixers are believed to have assisted criminals to launder crypto. Tornado Cash has been accused of laundering more than $7 billion worth of crypto since it began operations in 2019. 

“Today, the Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, US.

“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. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them,” he added.

The Department of the Treasury has claimed that the Lazarus Group, a North Korean state-sponsored hacking group, had used the website to launder $455 million worth of stolen crypto. Tornado cash was also used to launder $96 million in the June 24, 2022 Harmony Bridge Heist, and the $7.8 million crypto theft in the very recent August 2, 2022 Nomad Heist.

This is OFAC’s latest attempt at the ongoing efforts against the crypto laundromat industry. Previously, the Department of the Treasury had sanctioned Blender (dot) io after it was revealed to have laundered some part of the $620 million worth of crypto stolen in the Axie Infinity Hack, one of the biggest crypto heists to date.

While cryptocurrency is believed to be able to provide benefits to countries like El Salvador and/or Nigeria where the native currency cannot withstand the rising inflation, it can also be used by cybercriminals as a money laundering route. 

The Ethereum Blockchain has more features than the Bitcoin Blockchain, such as smart contracts and decentralised app (dApps), which makes it difficult to track crypto transactions on the ETH Blockchain. 

Tornado takes a variety of transactions and mixes them up before sending the crypto back to their respective recipients. While the goal is to increase secrecy, cybercriminals often use mixers, such as Tornado, to launder funds, particularly those stolen in major crypto heists.