Tornado Cash Popular Among Hackers Despite OFAC Sanctions

Tornado Cash, a crypto mixing service, has been subject to sanctions by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), therefore severely restricting anyone engaged with the system. These penalties essentially ban any wallet connected to the service, so it is quite difficult for those wallets to turn their crypto holdings into fiat money via compliant centralized exchanges.

OFAC Cracks Down on Tornado Cash

Flipside Crypto confirmed that the crypto mixer has received $1.9 billion in the first six months of the year and continues to grow popular among the hackers.

Among hacking groups trying to hide the source of pilfers, Tornado Cash remains a preferred weapon despite the penalties. Blockchain analytics company Arkham Intelligence claims that the hacker behind the $100 million Poloniex attack has channeled $76 million into Tornado Cash since May. 

Likewise, individuals behind the HECO Bridge and Orbit Chain hacks have sent $166 million and $48 million, respectively, through the mixer during the first half of the year. More recently, a Tornado Cash payment linked one of the wallets involved in the $235 million attack of Indian cryptocurrency exchange WazirX on July 18.

Tornado Cash’s Legal Troubles

An ongoing lawsuit started in 2022 by numerous crypto industry leaders challenges the legitimacy of these sanctions. The plaintiffs contend that since Tornado Cash is not a country or a “entity” and so does not fit the conventional scope of OFAC’s authority, approving it is both “unlawful and unconstitutional”.

They further assert that as guaranteed by the U.S. Constitution, the penalties violate the right to free expression. Significant entities in the crypto space that align with the plaintiffs’ claims— Coinbase, The Blockchain Association, and Coin Center—have backed this action.

Under defense, the U.S. Treasury claims that mixes of cryptocurrencies like Tornado Cash endanger national security. According to the agency, Tornado Cash regularly neglected required procedures meant to stop money laundering activities.

Founders Behind Bars

The legal and regulatory activities directed against Tornado Cash have had a major effect on its co-founders. Following his conviction on allegations of money laundering, Alexey Pertsev was sentenced to five years and four months in a Dutch jail in 2023 Arrested in the United States on comparable grounds in August, Roman Storm entered not guilty and was released on a $2 million bond. He has since moved to dismiss all allegations. Roman Semenov, the third co-founder, is still at large and has not yet been charged with anything.