The US Department of Justice (DoJ) on Wednesday unsealed an indictment against the two founders of the now-sanctioned Tornado Cash cryptocurrency mixer service, accusing them of laundering more than $1 billion in criminal proceedings.
Both individuals, Roman Storm and Roman Semenov, have been charged with conspiracy to commit money laundering, conspiracy to violate sanctions, and conspiracy to operate an unlicensed money-transmitting business.
Storm, 34, is said to have been arrested in the US state of Washington. 35 year old Semenov is absconding in Dubai. They are accused of “making millions of dollars in profit” from the promotion and operation of the service. Tornado Cash is estimated to have processed over $7 billion worth of crypto assets over a period of three years.
In a related move, the US Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Semenov and eight cryptocurrency addresses linked to him, days after a US court ruled that Tornado Cash is a separate entity that can be sanctioned.
“Eight addresses […] processed more than $11.5 million in various crypto assets, including TRON, Tornado Cash’s governance token,” Elliptic said. “Funds have been transferred from these addresses to a variety of services, including both centralized and decentralized exchanges.”
US Attorney Damian Williams said, “Roman Storm and Roman Semenov allegedly operated Tornado Cash and knowingly facilitated this money laundering.” “By publicly claiming to offer a technologically sophisticated privacy service, Storm and Semenov knew in fact that they were helping hackers and fraudsters hide the fruits of their crimes.”
Tornado Cash is a decentralized mixer service that was created in 2019 to mix cryptocurrencies of many users together in order to confuse the origin and owners of the funds. The aim is to make transactions anonymous and difficult to trace, making it attractive to criminal actors looking to capitalize on ill-gotten gains.
The defendants have been identified as two of the three co-founders of Tornado Cash. The third co-founder, Alexey Pertsev, was arrested last August in the Netherlands, where he currently awaits trial on money laundering charges.
Furthermore, Tornado Cash is said to have failed to implement effective Know Your Customer (KYC) or anti-money laundering programs as required by law. Nor was it registered with the US Financial Crimes Enforcement Network (FinCEN) as a money transmission entity.
The DoJ also fingered Tornado Cash for helping launder hundreds of millions of dollars for notorious North Korean threat actor Lazarus Group in April and May 2022, facilitating transactions that violated sanctions.
The development comes a year after the U.S. The Treasury Department imposed sanctions against Tornado Cash, accusing the platform of providing “material support” to the hacking crew and laundering more than $500 million stolen from hacks of Axie Infinity and Harmony Horizon Bridge last year.
It is noteworthy that Lazarus Group was cleared by OFAC on September 13, 2019.
In recent years, North Korea has become infamous for brazenly pulling off high-profile cryptocurrency heists, laundering the funds through mixing services like Tornado Cash and Sinbad, and funneling them back to the country to fund the regime’s nuclear and missile development programs.
Blockchain analytics company Chainalysis described 2022 as a banner year for crypto-related hacking, resulting in $3.8 billion stolen from businesses, of which nearly $1.7 billion was attributed to attacks by the Lazarus Group.
The indictment also comes after the conviction of 26-year-old Anthony Francis Faulk (aka “Shade”) in the US for his role in a conspiracy to defraud and extort more than a dozen cryptocurrency owners through SIM swapping attacks. He is expected to serve 36 months in prison and pay nearly $3 million in restitution.