Tornado Cash sanctioned by the US for facilitating money laundering

• TRM Labs researchers have also stated that North Koreans have taken advantage of the poor control implementation of the platform to move $1 billion of stolen funds. 

• North Korea’s Lazarus group which has been in the headlines for several high-profile attacks used the exchange to launder around $455 million.

Virtual currency mixer Tornado Cash has been sanctioned by the U.S. Treasury Department for being used by North Koreans for money laundering. According to the press briefing, cybercriminals have used the platform to launder over $7 billion in cryptocurrencies. North Korea’s Lazarus group which has been in the headlines for several high-profile attacks used the exchange to launder around $455 million. This money was used to fund the recent attack on Harmony Bridge. 

According to Elliptic, a blockchain analytics platform, an estimate of $1.5 billion generated from criminal activities has been landed through Tornado Cash. The Treasury Department also stated that during the Nomad heist, hackers used the platform to launder $7.8 million in cryptocurrencies. The Lazarus group stole $625 million from Ronin Network, an online sidechain. 

Brian Nelson, the Under Secretary for Financial Intelligence, stated that the platform has failed to implement effective control making it possible for hackers to use it for money laundering. He also mentioned that some of these crimes were performed against US victims. 

Tornado Cash and other mixers largely used by North Korean hackers

The agency noted;

Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors regularly and without basic measures to address its risks. The US Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.

TRM Labs researchers have also stated that North Koreans have taken advantage of the poor control implementation of the platform to move $1 billion of stolen funds. 

The US government has over the years renewed its commitment to fight against money laundering on social media platforms. The sanction against Tornado Cash is a reflection of its effort against this act.

Digital asset mixers are believed to be a tool used by criminals to hide the traces of stolen funds. This was used by cybercriminals based in North Korea to attack the Axie Infinity hack. 

According to Ari Redbord, government affairs, and legal expert at TRM Labs, the sanctions could play a huge role in determining whether the use of mixers is “acceptable for laundering illicit funds.”

Redbord mentioned that North Korea is a cash-poor country. Due to its lack of export revenue, it has a high risk of experiencing a financial crisis. For this reason, they resort to hacking activities to fund their activities. 

Over the last year or so, we’ve moved from a post-9/11 world into a new digital battlefield. Nation-state actors know to go after crypto businesses to fund real weapon proliferation. It’s not just some hackers trying to fund a lifestyle.