Breaking: Tornado Cash developers arrested and charged with laundering more than $1 billion

Tornado Cash developers Roman Storm and Roman Semenov have been arrested on money laundering charges. Citing Deputy Secretary of the Treasury Wally Adeyemo on the matter:

Even after they knew the Lazarus Group was laundering hundreds of millions of dollars worth of stolen virtual currency through their mixing service for the benefit of the Kim regime, Tornado Cash’s founders continued to develop and promote the service and did not take meaningful steps to reduce its use for illicit purposes.

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned one of the three co-founders, Roman Semenov, claiming that the Russian materially aided Tornado Cash mixing service and the infamous Lazarus Group.

The Lazarus Group is notorious for hacking, with alleged ties to the Democratic People’s Republic of Korea (DPRK).

Exploiters and hackers use Tornado Cash, touted as a virtual mixer, to launder their loot. As such, the service is mainly used by criminals. A paragraph from the official statement by the US Department Of The Treasury reads:

Tornado Cash has been used to launder funds for criminal actors since its creation in 2019, including obfuscating hundreds of millions of dollars in virtual currency stolen by Lazarus Group hackers.

The US Department of Justice (DOJ) participated in the sanction, unsealing an indictment against two Tornado Cash principals, Semenov and Roman Storm. The Federal Bureau of Investigation (FBI), in collaboration with the Internal Revenue Service (IRS), arrested Storm on August 23.

The DOJ is charging the two principals for:

• Conspiracy to commit money laundering
• Conspiracy to operate an unlicensed money-transmitting business, and
• Conspiracy to commit sanctions violations

A third player in the mix, Alexey Pertsev, also a principal, was arrested on similar charges in the Netherlands by Dutch law enforcement. This happened in August 2022, but he was released around April 21 to await trial at home.

The move is a warning about possible clampdown against projects offering "mixing" services for crypto to the public, placing them on the DOJ's radar.

During Pertsev's arrest last year, questions were raised about whether it was ideal to arrest a code developer, especially considering the open-source Tornado Cash software. 

Supposing there is any solidity to this line of thought, then it would pass as a possible threat against developing Web3 projects, whose products could be leveraged by criminals locally or internationally.