Two of the original developers of the crypto mixer Tornado Cash are caught up in a whole new shitstorm of a federal indictment. On Wednesday, the U.S. alleged that two of the original devs, Roman Storm and Roman Semenov, helped crypto criminals launder millions of crypto at a time helping to emphasize the “anonymous” nature of illicit dealings.
The U.S. Attorney’s Office for the Southern District of New York unsealed a new indictment alleging two of the mixer’s original devs conspired to violate sanctions and help hackers launder more than $US1 billion in crypto. Prosecutors said police arrested Storm in his home state of Washington on Wednesday. Semenov, a Russian national, currently remains at large.
In a statement, U.S. Attorney Damian Williams said that while the Tornado Cash devs publicly claimed “to offer a technically sophisticated privacy service,” they “in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes.”
The U.S. alleged in its indictment that Storm and Semenov “knew [Tornado Cash] was a haven for criminals to engage in large-scale money laundering and sanctions evasion.” The pair allegedly worked with a figure referred to as “CC-1,” who is likely Alexey Pertsev. Pertsev is currently working to fight off similar money laundering charges alleged by prosecutors in the Netherlands. Pertsev was released from jail in April this year after his arrest in 2022, and he’s still trying to clear his name. Pertsev currently awaits trial
A crypto mixer is essentially a big pool where crypto users can put their tokens. The crypto gets shuffled, then redistributed to all the users equal to the original amount they put in, minus a fee taken by the mixer. Originally established in 2019, Tornado Cash worked primarily on the Ethereum blockchain, with most transactions trading in ETH. The more people using the service, the more their crypto could be anonymized.
Feds alleged that Tornado Cash worked without any real know-your-customer or anti-money laundering apparatus. In the indictment, prosecutors claimed that all money-transmitting businesses, “including businesses engaged in transmission of cryptocurrencies” have to register with the DOT’s Financial Crimes Enforcement Network, AKA FinCEN. Though Tornado Cash operated in the U.S. through relayers, U.S. Attorneys said Storm and Semenov didn’t register with the agency.
More than that, feds claim the founders regularly discussed crypto users’ complaints that hacked funds were being anonymized through their mixer. The indictment describes two times that crypto exchanges reached out to Tornado Cash about hacked funds being anonymized, but that the devs “declined to offer any assistance.”
Tornado Cash was just one of many mixers available, but the feds especially targeted Tornado Cash because it was the place where major crypto hackers used to disguise their stolen tokens. The U.S. sanctioned Tornado Cash last year alleging the mixer was acting as a one-stop shop for money laundering. The U.S. Department of the Treasury claimed the Lazarus Group, a hacking front affiliated with the North Korean government, used Tornado Cash to hide its ill-gotten gains. The FBI linked the Lazarus Group to the $US615 million hack of the Ronin Network last year.
The feds alleged the Tornado Cash devs tried to mislead the public about their ownership and control of Tornado Cash. Prosecutors said Storm once claimed in an interview that Tornado Cash was a “not for profit,” but the dev pitched the company as a business to U.S. investors.