FBI Detains Tornado Cash Bitcoin Mixer Founder Over Money Laundering Allegations in North Korea

• Roman Semenov, co-founder of Tornado Cash, faces U.S. sanctions over alleged support to North Korea’s Lazarus Group.
• The FBI and IRS detained co-founder Roman Storm over conspiracy allegations, and Alexey Pertsev faced arrest in 2022.

Delving into Tornado Cash’s Ties with the Lazarus Group

Tornado Cash, a reputable name in the realm of crypto mixing services designed to amplify transactional privacy, is now facing the brunt of regulatory wrath. The technique they use, essentially shuffling the origin of a crypto transaction, is allegedly being exploited for less savory purposes.

Roman Semenov, distinguished as one of Tornado Cash’s triumvirate of founders, is now facing sanctions from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). The sanctions have been imposed due to Semenov’s supposed material support not only to Tornado Cash but also to the Lazarus Group. This group is a notorious state-backed hacking organization affiliated with the Democratic People’s Republic of Korea (DPRK).

Furthermore, a combined effort by the FBI and the IRS led to the arrest of the second founding member, Roman Storm, on accusations of orchestrating an unregistered money-transmitting enterprise. The final piece of this triad, Alexey Pertsev, encountered his own legal entanglements with an arrest in the Netherlands in 2022.

Despite being cognizant of Lazarus Group’s manipulation of their service for money laundering, particularly on behalf of the Kim regime, Tornado Cash’s leadership continued to propagate and endorse their platform. The Treasury Department emphasized their willful negligence in mitigating its misuse.

US Attorney Damian Williams expressed,

“Despite masquerading as a technically superior privacy service, both Storm and Semenov were evidently aiding cybercriminals in masking their illicit earnings.”

It’s crucial to note the Lazarus Group’s historical significance. After receiving sanctions from the U.S. in 2019, they leveraged Tornado Cash to veil the movement of a staggering $455 million. This colossal sum was illicitly acquired from an attack on the Ronin network bridge of Axie Infinity in March 2022, marking the record for the largest virtual currency heist to date.

In light of the charges against Roman Storm, his legal representative, Brian Klein, posited that prosecuting Storm merely for software development could set a precarious precedent. He emphasized Storm’s cooperative nature throughout the investigation and contested any alleged involvement in criminal activities.