Tornado Cash Founders Accused of Laundering Over $1 Billion, Including Millions for North Korea

Two founders of Tornado Cash, the widely known Russian cryptocurrency mixer, have been charged with laundering over $1 billion in criminal proceeds.

In an indictment that was recently unsealed, Roman Storm and Roman Semenov are both accused of violating sanctions and laundering money through Tornado Cash, including hundreds of millions of dollars for the Lazarus Group, a sanctioned North Korean state-backed hacking group.

The charges in the indictment include conspiring to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitting business.

Storm has been arrested in Washington state, according to a statement from the Justice Department, while Semenov, a Russian national, remains at large. Alexey Pertsev, the third co-founder, who is not mentioned in this action, is facing trial in Amsterdam for his involvement with Tornado Cash.

“Roman Storm and Roman Semenov allegedly operated Tornado Cash and knowingly facilitated this money laundering,” said U.S. Attorney Damian Williams, emphasizing that they were enabling hackers and fraudsters to hide their illegal gains.

The indictment also alleges that Storm and Semenov failed to implement required know your customer and anti-money laundering programs, and instead, promoted Tornado Cash as a service that enabled untraceable and anonymous financial transactions.

Brian Klein, Storm’s lawyer and a partner with Waymaker LLP, expressed disappointment with the charges, stating that they were based on a novel legal theory that could have dangerous implications for all software developers.

Klein added that Storm has been cooperating with the investigation and denies engaging in any criminal conduct, and more information will be revealed during the trial.

The joint action involved the Federal Bureau of Investigation, the Justice Department, and the Internal Revenue Service’s Criminal Investigation unit.

The Office of Foreign Assets Control (OFAC) has also sanctioned Semenov, who was previously banned by OFAC from using Tornado Cash in August 2022.

Tornado Cash is used by some individuals to protect their privacy in the crypto market. It anonymizes funds and conceals the buyer’s identity when making crypto transactions, preventing the recipient from accessing the purchaser’s public crypto wallet details and history.

However, the service has also been associated with high-profile crypto heists in 2022, including the theft of tokens from Ronin and a attack on Harmony, both linked to the Lazarus Group.

Blockchain analytics firm Elliptic has identified over $1.5 billion in proceeds from criminal activities laundered through Tornado Cash, and they have traced the entirety of the $100 million stolen from the Harmony bridge to the service.

The U.S. Treasury previously estimated that Tornado Cash has been used to launder over $7 billion worth of virtual currency since its launch in 2019.

Some blockchain analytics tools have been successful in “demixing” crypto sent through Tornado to identify the source of the funds.

In blacklisting Tornado Cash, the Treasury Department aims to target criminals who have used the service for money laundering.