The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury added Roman Semenov, one of the founders of the Tornado Cash cryptocurrency “exchange,” to the Specially Designated Nationals and Blocked Persons (SDN) List on August 23. Co-founder Roman Storm was arrested on the same day by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation division in the state of Washington.
Tornado Cash Allegations!
The indictment announced on August 23 accuses Semenov and Storm of conspiring to launder money, conspiring to violate sanctions, and conspiring to conduct an unlicensed money transmission business. Semenov is still at large. Alexey Pertsev, the third co-founder of Tornado Cash, was arrested in the Netherlands in August 2022 on charges of money laundering. Damian Williams, the Southern District of New York’s United States Attorney, said in a statement issued by the Department of Justice (DOJ):
As alleged… Storm and Semenov knew that, while publicly claiming to offer an advanced privacy service, they were actually helping hackers and fraudsters conceal the fruits of their crimes.
The actions of law enforcement are a continuation of the crackdown launched by the US government against Tornado Cash last year. OFAC placed 44 addresses on the SDN list in August 2022, effectively preventing US residents from using the service.
Coinbase Supports the Lawsuit!
OFAC’s sanctions against Tornado Cash sparked a backlash in the crypto community. Coinbase supported a lawsuit filed by six individuals claiming that the Treasury Department exceeded its authority to impose sanctions on the exchange. Advocacy group Coin Center also filed a similar lawsuit. Tom Emmer, a pro-crypto member of the US House of Representatives, wrote a letter questioning this move to Treasury Secretary Janet Yellen.
Both the DOJ and OFAC specifically mention Tornado Cash’s role in laundering funds for the Lazarus Group, a North Korea-linked hacker group also listed on the SDN list, but it is noted that Tornado Cash was involved in other hacks as well. According to the Department of Justice’s allegations, the exchange was found to have made over $1 billion in illicit gains.
