Tornado Cash: US Treasury Sanctions Cryptocurrency ‘Mixer’ Reportedly Used by North Korea for Money Laundering

According to a senior finance ministry official, Tornado Cash has reportedly laundered more than $7 billion in virtual currencies since its launch in 2019, including $455 million from the Lazarus Group, a North Korean state-sponsored hacking group. It was also used last week to launder money from a “robbery” of Nomad, a US cryptocurrency company, the official said.

Monday’s sanctions will prohibit US individuals, and those under US jurisdiction, from using the virtual currency mixer.

A virtual currency mixer receives a number of transactions and mixes them before sending them to their final destination to make it more difficult to trace where the money is coming from or where it is going.

Tornado Cash has made some effort to meet its legal obligations, including by adding a screening tool to prevent funds from going into previously approved cryptocurrency wallets, the senior Treasury official said. But despite that, law enforcement analysis of public cryptocurrency transactions showed that hackers like the Lazarus Group could still send money to Tornado Cash for money laundering, the official said.

As part of Monday’s action, 44 cryptocurrency wallets linked to Tornado Cash were sanctioned by the US government. The Treasury official said Tornado Cash had previously been identified as an entity of concern, but declined to say how long and where the organization may have been based or who may be operating it.

“Despite public commitments, Tornado Cash has repeatedly failed to put in place effective controls to prevent it from being carried out on a regular basis and without basic measures to launder the money laundering risks for malicious cyber actors,” Treasury Secretary for Terrorism and Financial Intelligence Brian Nelson said in a statement. “Treasury will continue to act aggressively against mixers that launder virtual currencies for criminals and those who help them.”

According to the Treasury official, Tornado Cash is one of the largest virtual currency mixers identified by the US government. It is only the second time the ministry has sanctioned such an entity.

In May, the Treasury Department approved another virtual currency mixer, Blender.io, which it said was being used by North Korea “to support its malicious cyber activities and launder money from stolen virtual currencies”.

The official said they hoped Monday’s sanctions would send a message to the private sector and partner countries encouraging them to develop rules when it comes to virtual currencies.

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