Treasury Lifts Tornado Cash Sanctions After Policy Review

The U.S. Treasury Department has lifted sanctions against the cryptocurrency mixer service Tornado Cash, which was previously accused of facilitating money laundering for North Korea’s Lazarus Group. The sanctions, imposed in August 2022 by the Office of Foreign Assets Control (OFAC), were removed following a review of the legal and policy issues surrounding the use of financial sanctions in evolving technological environments. The Treasury Department emphasized its commitment to countering North Korea’s cyber threats and enforcing sanctions against illicit digital asset activities.

Tornado Cash, a crypto mixer, has been a critical tool for cybercriminals involved in money laundering. According to OFAC, the service was used to launder over $7 billion in virtual currency since its inception in 2019. Notably, the Lazarus APT group utilized Tornado Cash to launder more than $455 million from the largest known virtual currency heist. Additionally, the mixer was involved in laundering funds from the Harmony Bridge Heist and the Nomad crypto heist.

The U.S. Treasury’s decision to remove sanctions was based on a review of the novel legal and policy issues raised by the use of financial sanctions in evolving technological environments. The Treasury Department highlighted its commitment to countering North Korea’s cyber threats and enforcing sanctions against illicit digital asset activities. The department also warned against transactions that aid cybercriminals or the Democratic People’s Republic of Korea (DPRK), urging caution to avoid associated risks.

The Treasury Department also removed over 100 Ethereum (ETH) wallet addresses from the Specially Designated Nationals (SDN) list. The SDN list includes individuals, entities, and organizations blocked from doing business in the U.S. due to their involvement in activities such as terrorism, drug trafficking, cybercrime, human rights violations, and the proliferation of weapons of mass destruction. U.S. persons and businesses are prohibited from engaging in transactions with those on the SDN list, and any assets they hold in the U.S. are frozen.

In August 2023, the U.S. Justice Department charged two Tornado Cash founders, Roman Storm and Roman Semenov, with conspiracy to commit money laundering and conspiracy to violate the International Economic Emergency Powers Act. They face up to 20 years in prison for these charges and up to 5 years for conspiracy to operate an unlicensed money-transmitting business. The duo operated the Tornado Cash cryptocurrency mixer, which facilitated over $1 billion in money laundering transactions and laundered hundreds of millions of dollars for the Lazarus APT group.

In March 2024, the North Korea-linked Lazarus APT group allegedly resumed using the mixer platform Tornado Cash to launder $23 million. Blockchain cybersecurity firm Elliptic linked the theft of $112.5 million from exchange HTX, which took place in November 2023, to the North Korea’s group. Elliptic reported that over the past day, the group laundered more than $23 million from this attack through Tornado Cash. In response to the 2022 sanctions, Lazarus turned to the mixer Sinbad.io, but this service was seized by U.S. authorities in November 2023.

In May 2024, Alexey Pertsev, one of the main developers of the Tornado Cash cryptocurrency mixer, was sentenced to 64 months in prison for helping launder over $2 billion worth of cryptocurrency. Pertsev was arrested in Amsterdam in August 2022 and accused of concealing criminal financial flows and facilitating money laundering using Tornado Cash. The Financial Advanced Cyber Team (FACT) speculated that Tornado Cash has been used to conceal large-scale criminal money flows. Pertsev argued that his work at the Tornado Cash platform aimed to offer privacy to the cryptocurrency community and avoid involvement in criminal activities. However, the court dismissed his claims, noting that Tornado Cash lacked anti-abuse measures and the developers failed to prevent money laundering. The court also criticized Pertsev’s behavior for not cooperating with authorities regarding the illegal activities. He also claimed an inability to address the issue. The court sentenced the defendant to 5 years and 4 months in prison, in accordance with the prosecutor’s request. The court additionally decided not to return the defendant’s seized Porsche and approximately 1.9 million euros worth of cryptocurrency.