U.S. Authorities Arrest Tornado Cash Co-Founder
The U.S. Department of Justice has charged two co-founders of the cryptocurrency mixer Tornado Cash, Roman Storm and Roman Semenov, with helping criminals—including the North Korean Lazarus Group—launder over $1 billion in stolen cryptocurrency. Storm was arrested in Washington state, while Semenov was charged in absentia.
Back on August 8, 2022, the U.S. Office of Foreign Assets Control (OFAC) announced that more than $7 billion had been laundered through Tornado Cash since its creation in 2019. According to OFAC, the operators failed or refused to implement “effective controls designed to prevent regular money laundering by bad actors.” As a result, sanctions were imposed on the mixer service: all property and interests in property of Tornado Cash located in the U.S. or under the control of U.S. persons were blocked and must be reported to OFAC. U.S. citizens and others in the United States are now prohibited from doing business with Tornado Cash without special permission from OFAC. Additionally, any organizations directly or indirectly owned 50% or more by such individuals were also sanctioned.
Authorities stated that the sanctions were related to funds laundered through Tornado Cash that were stolen by hackers in several high-profile incidents, including the Harmony hack (about $96 million), the compromise of the Ronin blockchain associated with the popular NFT game Axie Infinity (over $600 million stolen, with $455 million laundered through the mixer), and approximately $7.8 million from the Nomad crypto bridge hack.
According to the U.S. Department of Justice, 34-year-old Roman Storm was arrested last Wednesday in Washington state, where he resides. The other defendant, 35-year-old Roman Semenov, a Russian citizen, remains at large. OFAC has also announced sanctions against Semenov for providing support to the North Korean government.
Storm and Semenov are believed to have founded Tornado Cash in 2019 along with Alexey Pertsev, who was arrested in the Netherlands in August last year on money laundering charges.
Both men are charged with conspiracy to commit money laundering and conspiracy to violate the International Emergency Economic Powers Act (IEEPA). The maximum penalty for each of these charges is 20 years in prison. The Tornado Cash founders are also accused of conspiracy to operate an unlicensed money transmitting business, which carries a maximum sentence of up to five years in prison.
“Even after [the Tornado Cash founders] learned that the Lazarus Group was laundering hundreds of millions of dollars in stolen virtual currency through their mixer, the founders continued to develop and promote the service and took no meaningful steps to reduce its use for illicit purposes,” said U.S. Deputy Treasury Secretary Wally Adeyemo.
“While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov actually knew they were helping hackers and fraudsters conceal the proceeds of their crimes,” commented prosecutor Damian Williams. “Today’s charges are a reminder that laundering money through cryptocurrency transactions is illegal, and those who engage in such laundering will be held accountable.”