Wednesday, the American justice indicted 2 of the co-founders of the cryptocurrency mixer Tornado Cash. One has been arrested and the second has been declared a fugitive. What are the charges against them?
The U.S. justice indict 2 co-founders of Tornado Cash
One year after the Office of Foreign Assets Control’s (OFAC) first sanctions against cryptocurrency mixer Tornado Cash, the soap opera continues with the indictment of 2 of the co-founders by the US Department of Justice (DoJ).
The individuals concerned are Roman Storm and Roman Semenov, both of whom face 3 charges:
- Conspiracy to commit money laundering;
- Conspiracy to breach the International Economic Emergency Powers Act;
- Conspiracy to operate an unlicensed money transfer business.
The first two charges each carry up to 20 years in prison and 5 years for the third. While Roman Storm was arrested on Wednesday in Washington State, Roman Semenov, a Russian national, was declared a fugitive.
These legal proceedings come a week after Judge Robert Pitman ruled against a civil action seeking to argue that sanctions against Tornado Cash were not within the remit of the Department of the Treasury. This meant that the protocol could be considered a clearly identified entity and could be prosecuted.
As a result of his leak, Roman Semenov was placed on OFAC’s Specially Designated Nationals (SND) list. For his part, Semenov shared a tweet last night, calling for donations to help defend the protocol developers:
You can help defending the right to privacy and the right to publish code by donating for the legal defense of the developers of @TornadoCash at https://t.co/KcLWwF7QwR
– Roman Semenov ️ (@semenov_roman_) August 24, 2023
Lazarus group’s use of protocol singled out
These twists and turns once again reopen the debate on the right to confidentiality afforded by mixers such as Tornado Cash. While these protocols can be used quite legitimately, it is the fact that Tornado Cash was used for malicious purposes that is being singled out.
The DoJ press release points to the fact that the protocol has helped launder “more than one billion dollars”, particularly for hackers such as the North Koreans of the Lazarus group, who have been involved in numerous attacks against decentralised finance applications (DeFi).
US Attorney Damian Williams backed up these accusations:
While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov actually knew they were helping hackers and fraudsters hide the fruits of their crimes. Today’s indictment is a reminder that money laundering through cryptocurrency transactions breaks the law and those who engage in such laundering will be prosecuted. “
The case has been assigned to District Judge Katherine Polk Failla, who is also working on the Securities and Exchange Commission (SEC) lawsuit against Coinbase.
Alexey Perstev, another developer of the protocol who was imprisoned in the Netherlands and released on 28 April, has not been named in the DoJ’s charges.
