US Treasury Band Tornado Cash | NFT Culture | NFT and Crypto Art Interviews and more

Tornado Cash is a Dapp that allows users to transact on the Ethereum network which aggregates cryptocurrencies and makes transactions difficult to track. Tornado Cash has been praised by many DeFi enthusiasts but has also been used by nefarious hackers, scammers and others to launder cryptocurrencies. Ironically, continued legislation surrounding cryptocurrency makes it more legitimate, but many have criticized the US government for continuing to crack down on the space.

“Today, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) approved virtual currency mixer Tornado Cash, which has been used to launder $7 billion worth of virtual currency since its creation in 2019,”

Today, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) approved virtual currency mixer Tornado Cash, which has been used to launder $7 billion worth of virtual currency since its creation in 2019. This includes the theft of more than $455 million by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group sanctioned by the United States in 2019, in the largest known virtual currency heist to date. Tornado Cash was later used to launder more than $96 million in funds to malicious cyber actors from the June 24, 2022 Harmony Bridge heist and at least $7.8 million from the August 2, 2022 Nomad heist. Today’s action is pursuant to Executive Order (EO) 13694, as amended, and follows OFAC’s May 6, 2022 designation of virtual currency mixer Blender.io (Blender).

“Today, the Treasury is authorizing Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrime, including those committed against victims in the United States,” said Under Secretary of Terrorism and Financial Intelligence Brian E. Nelson said “Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls to prevent money laundering for malicious cyber actors and without basic measures to address its risks. The Treasury will continue to aggressively pursue criminal actions against virtual currency launderers and those who support them.”

Treasury has worked to expose elements of the virtual currency ecosystem, such as Tornado Cash and Blender.io, that cybercriminals use to obscure the proceeds of illegal cyber activity and other crimes. Although most virtual currency activity is licit, it can be used for illicit activities including sanctions evasion through mixers, peer-to-peer exchangers, darknet markets and exchanges. This includes facilitating theft, ransomware schemes, fraud and other cyber crimes. Treasury continues to use its authority against malicious cyber actors in concert with other US departments and agencies, as well as foreign partners, to expose, disrupt and hold accountable criminals and individuals who enable criminals to profit from cybercrime and other illegal activities. For example, in 2020, the Treasury’s Financial Crimes Enforcement Network (FinCEN) assessed a $60 million civil money penalty against the owner and operator of a virtual currency mixer for violations of the Bank Secrecy Act (BSA) and its implementing regulations.

Mixer: Tornado Cash

Tornado Cash (Tornado) is a virtual currency mixer that operates on the Ethereum blockchain and facilitates anonymous transactions by arbitrarily obscuring their origin, destination and counterparty, without any attempt to determine their origin. Tornado takes different types of transactions and aggregates them before sending them to individual recipients. Although the purported purpose is to enhance privacy, mixers like Tornado are commonly used by illegal actors to launder funds, especially those stolen during significant heists.

Tornado is designated pursuant to EO 13694, as amended, to provide material assistance, sponsorship, or financial, material, or technical assistance, or goods or services for or in support of, a cyber-enabled activity arising from or directed to persons located outside the United States. by, in whole or in substantial part, that may cause or materially contribute to a significant threat to national security, foreign policy, or the economic health or financial stability of the United States and has the purpose or effect of funding commercial or competitive advantage or personal financial gain; or Causing significant misuse of economic resources, trade secrets, personally identifiable or financial information.

Illegal financial risks

Virtual currency mixers that support criminals are a threat to US national security. Treasury will continue to investigate the use of Mixer for illicit purposes and use its authority to respond to the risk of illicit financing in the virtual currency ecosystem.

Criminals have increasingly used anonymity-enhancing technologies, including mixers, to help hide the movement or source of funds. Additional information on illicit financing risks associated with Mixer and other anonymity-enhancing technologies in the virtual asset ecosystem can be found in the 2022 National Money Laundering Risk Assessment.

Those in the virtual currency industry play a critical role in complying with their Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) and sanctions obligations to prevent sanctioned persons and other illicit actors from exploiting virtual currencies to undermine US foreign policy and national security interests. . As part of that effort, the industry should adopt a risk-based approach to assess the risks associated with various virtual currency services, implement measures to mitigate risks, and address the challenges that anonymous features may present in complying with AML/CFT obligations. As today’s action shows, mixers should generally be considered high-risk by virtual currency firms, which should only process transactions if they have appropriate controls in place to prevent mixers from being used for illicit money laundering.

Implications of Prohibition

As a result of today’s action, all property and interests in the property of the above entity, Tornado Cash, located in the United States or in the possession or control of US persons must be reported to OFAC. Also, any entity directly or indirectly 50 percent or more owned by one or more blocked persons is also blocked. All transactions by or within (or transiting) the United States involving any property or interest in the property of designated or otherwise blocked persons are prohibited unless authorized by, or exempt from, a general or specific license issued by OFAC. These prohibitions include making any contribution or provision of funds, goods, or services to, by, or for the benefit of any blocked person and receiving any contribution or provision of funds, goods, or services from any such person.

The power and integrity of OFAC sanctions derives not only from OFAC’s ability to designate and add individuals to the SDN List, but also from its willingness to remove individuals from the SDN List consistent with law. The ultimate goal of sanctions is not to punish, but to bring about positive changes in behavior. For information on the process for requesting removal from an OFAC list, including the SDN list, please see OFAC’s Frequently Asked Questions 897 here. For detailed information on the process for submitting a request for removal from an OFAC sanctions list, click here

To locate information about authorized entities today, as well as associated virtual wallet addresses, click here

To report a cyber-crime, contact the Federal Bureau of Investigation’s Internet Crime Complaint Center here.

For the US government’s 2020 DPRK Cyber ​​Threat Advisory, click here.

For information on complying with the virtual currency ban, see OFAC’s Sanctions Compliance Guide for the Virtual Currency Industry here and OFAC’s Frequently Asked Questions on Virtual Currency.

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