WASHINGTON – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on the virtual currency mixer #TornadoCash. , which has facilitated the laundering of over $7 billion in virtual currency since its inception in 2019. This amount includes more than $455 million that was stolen by the Lazarus Group, a state-sponsored hacking organization from the Democratic People’s Republic of Korea (DPRK) that was sanctioned by the U.S. in 2019, marking the largest known virtual currency theft to date. Tornado Cash has also been implicated in laundering over $96 million linked to the June 24, 2022 Harmony Bridge Heist, as well as at least $7.8 million from the August 2, 2022 Nomad Heist. This action is being taken in accordance with Executive Order (E.O.) 13694, as amended, and follows OFAC’s designation of the virtual currency mixer Blender.io on May 6, 2022.
“Today, the Treasury is sanctioning Tornado Cash, a virtual currency mixer that facilitates the laundering of proceeds from cybercrimes, including those affecting victims in the United States,” stated Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “Despite public claims to the contrary, Tornado Cash has consistently failed to implement effective controls to prevent it from laundering funds for malicious cyber actors regularly and without adequate measures to mitigate its risks. The Treasury will persist in its vigorous efforts against mixers that launder virtual currency for criminals and those who support them.”
The Treasury has taken steps to unveil various elements of the virtual currency ecosystem, such as Tornado Cash and Blender.io, which are utilized by cybercriminals to conceal the proceeds from illegal cyber activities and other offenses. Although the majority of virtual currency transactions are legitimate, they can also facilitate unlawful activities, including evasion of sanctions through mixers, peer-to-peer exchanges, darknet markets, and exchanges. This encompasses the support of heists, ransomware attacks, fraud, and other forms of cybercrime.
The Treasury remains committed to employing its authorities against harmful cyber actors in collaboration with other U.S. departments and agencies, as well as international partners, to identify, disrupt, and hold accountable those who perpetrate and enable criminal profits from cybercrime and other illegal activities. For instance, in 2020, the Financial Crimes Enforcement Network (FinCEN) of the Treasury imposed a civil monetary penalty of $60 million on the owner and operator of a virtual currency mixer for breaching the Bank Secrecy Act (BSA) and its associated regulations.
MIXER: TORNADO CASH
Tornado Cash (Tornado) is a cryptocurrency mixing service that functions on the Ethereum blockchain, enabling anonymous transactions by concealing their origins, destinations, and involved parties without any effort to trace their source. Tornado aggregates various transactions, blending them before sending them to their respective recipients. Although its primary aim is to enhance user privacy, mixers such as Tornado are frequently exploited by individuals engaged in illegal activities to launder money, particularly funds acquired through major thefts.
Tornado has been designated under E.O. 13694, as amended, for its significant role in assisting, sponsoring, or providing financial, material, or technological support for cyber-enabled activities that originate from or are directed by individuals located, in whole or in substantial part, outside the United States. These activities are likely to pose a considerable threat to the national security, foreign policy, or economic health and financial stability of the United States, with the intent or effect of causing substantial misappropriation of funds, economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or personal financial gain.
ILLICIT FINANCE RISKS
Virtual currency mixers that facilitate criminal activities pose a significant threat to national security in the United States. The Treasury Department will persist in its investigations into the utilization of mixers for unlawful purposes and will employ its regulatory powers to address the risks associated with illicit financing within the virtual currency landscape.
There has been a notable increase in the use of anonymity-enhancing technologies, such as mixers, by criminals seeking to obscure the flow or origin of funds. Further details regarding the illicit financing risks linked to mixers and other anonymity-enhancing technologies in the virtual asset sector can be found in the 2022 National Money Laundering Risk Assessment.
Participants in the virtual currency industry have a vital responsibility to adhere to their Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) and sanctions obligations. This compliance is essential to prevent sanctioned individuals and other illicit actors from exploiting virtual currency in ways that could undermine U.S. foreign policy and national security interests. To support this initiative, the industry should adopt a risk-based approach to evaluate the risks associated with various virtual currency services, implement strategies to mitigate these risks, and confront the challenges that anonymizing features may pose to compliance with AML/CFT requirements. As evidenced by recent actions, mixers should generally be regarded as high-risk by virtual currency firms, which should only engage in transactions if they have established adequate controls to prevent the use of mixers for laundering illicit proceeds.
SANCTIONS IMPLICATIONS
Following today's action, all property and interests in property belonging to the aforementioned entity, Tornado Cash, that are located within the United States or are under the possession or control of U.S. persons are hereby blocked and must be reported to OFAC. Furthermore, any entities that are owned, either directly or indirectly, by one or more blocked individuals to the extent of 50 percent or more are also subject to blocking. Transactions conducted by U.S. persons or occurring within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked individuals are strictly prohibited unless authorized by a general or specific license issued by OFAC, or are otherwise exempt. These prohibitions encompass the provision of any contributions or resources, including funds, goods, or services, to or for the benefit of any blocked individual, as well as the receipt of any contributions or resources from such individuals.
The authority and effectiveness of OFAC sanctions stem not only from its capacity to designate and add individuals to the SDN List but also from its readiness to remove individuals from the SDN List in accordance with legal standards. The primary objective of sanctions is not punitive; rather, it aims to foster a constructive change in behavior.
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