Tornado Cash Founders Face US Charges for Handling $1B in Dirty Money

Roman Semenov and Roman Storm, the Founders of Tornado Cash, a cryptocurrency mixer, have been charged with assisting criminals, including hackers linked to the North Korea-linked Lazarus Group, to launder over $1 billion in illicit funds. Storm was arrested today (Wednesday) in Washington by the Federal Bureau of Investigation (FBI).

US Goes after Tornado Cash's Founders

A cryptocurrency mixer, also known as a tumbler, is a service utilized by digital asset holders to maintain anonymity of their cryptocurrency transactions. These tumblers blend potentially traceable crypto assets with large amounts of other funds.

The US Department of Justice noted in a statement released on Wednesday that it had charged Semenov and Storm with conspiracy to commit money laundering, sanctions violations, and operate an unlicensed money-transmitting business. According to the law enforcement agency, the executives received complaints and calls from victims of cybercrimes but deliberately avoided implementing any controls to stop the criminals from using its platform to launder the illicitly obtained cryptocurrencies.

Furthermore, the Founders through their platforms allegedly helped Lazarus Group “launder hundreds of millions of dollars in hacking proceeds,” despite the fact that the hacking group had been sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) as blocked property.

“Storm and Semenov allegedly knew that the Tornado Cash service they were operating was engaging in these sanctions-violating transactions,” the US prosecutors explained. “They implemented a change in the service so they could make a public announcement that they were compliant with sanctions, but in their private chats they agreed that this change would be ineffective.”

US Hits Roman Semenov with Sanctions Designation

Separately, OFAC on Wednesday issued a sanctions designation against Semenov, thereby following up on a similar sanction placed on Tornado Cash last year.

The designation means that Semenov’s assets in the United States are blocked, and he is considered detrimental to the country's security. The label also bars US-based and foreign organizations from engaging in financial transactions with the Co-Founder.

Last year, OFAC imposed its first sanction order against a cryptocurrency mixer. The financial intelligence agency accused Blender.io, another crypto tumbler, of laundering over $20.5 million in criminal proceeds for the Lazarus Group.

Furthermore, the agency in 2019 imposed similar sanctions on the Lazarus Group after it accused the North Korea-linked hacking group of using Tornado Cash to obscure the transfer of more than $455 million pilfered during the March 2022 breach of Axie Infinity's Ronin Network. It noted that the hack remains the most significant crypto heist so far.

“The Lazarus Group subsequently used Tornado Cash to launder more than $96 million of funds derived from the June 24, 2022, cyber-enabled heist on Harmony’s Horizon bridge, and at least $7.8 million from the August 2, 2022, Nomad heist,” OFAC explained. “This revenue provides the Democratic People’s Republic of Korea with resources that it uses to support its unlawful ballistic missile and nuclear weapons programs.”

Meanwhile, the FBI has attributed over $40 million worth of Bitcoin (BTC) stolen this week to Lazarus Group, Finance Magnates reported earlier today. The security agency said that the hackers were responsible for a number of major cyberattacks recorded in June 2023: including the heist of $60 million in digital assets from Alphapo, the $37 million stolen from CoinsPaid, and a $100 million misappropriated from Atomic Wallet.

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