The Treasury Department has imposed sanctions on virtual currency mixer Tornado Cash, which has allegedly helped to launder more than $7 billion worth of virtual currency since its creation in 2019.
Monday’s actions are the second-ever set of sanctions imposed on a digital currency blending firm.
Treasury’s Office of Foreign Assets Control says Tornado Cash’s systems were used to launder more than $96 million drawn from the June Harmony blockchain bridge theft and August Nomad crypto firm heist.
Mixing services combine various digital assets, including potentially illegally obtained funds and legitimately obtained funds, so that illegal actors can obscure the origin of stolen funds.
“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,” said Brian Nelson, Treasury’s undersecretary for terrorism and financial intelligence.
He said the agency “will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”
What is Tornado Cash?
Tornado Cash (Tornado) is a virtual currency mixer that operates on the Ethereum blockchain and indiscriminately facilitates anonymous transactions by obfuscating their origin, destination, and counterparties, with no attempt to determine their origin. Tornado receives a variety of transactions and mixes them together before transmitting them to their individual recipients. While the purported purpose is to increase privacy, mixers like Tornado are commonly used by illicit actors to launder funds, especially those stolen during significant heists.
Tornado is being designated pursuant to E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a cyber-enabled activity originating from, or directed by persons located, in whole or in substantial part, outside the United States that is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States and that has the purpose or effect of causing a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain.
In May, the U.S. announced sanctions against North Korean digital currency mixing firm Blender.io, accused of helping Lazarus Group, a sanctioned North Korean cyber hacking group, to carry out a $620 million digital currency heist in March.
The new sanctions also point to the growing use of digital assets to perpetuate illegal acts by state actors and individuals.
Lawmakers and administration officials have voiced concerns about the use of cryptocurrency to engage in illicit acts.
In March, President Joe Biden issued an executive order on digital assets, in part calling for federal regulators to help mitigate the illicit finance and national security risks posed by misuse of digital assets.
