A 29-year-old man was arrested for allegedly disguising illicit financial flows and promoting money laundering via Tornado Cash.
An Alleged Money Laundering Facilitator Via Tornado Cash Was Seized
The Dutch government agency investigating financial crimes has detained a person believed to be the creator of the American-approved cryptocurrency mixing service Tornado Cash.
According to the Fiscal Information and Investigation Business, the 29-year-old man was detained on suspicion of "concealing unlawful financial flows and assisting money laundering" using the well-known cryptocurrency mixing service.
The move came days after the US government sanctioned Tornado Cash for facilitating the laundering of billions of dollars in cryptocurrency. Tornado Cash jumbles payments from several sources before transferring them to the final destination.
According to the US Treasury, Tornado Cash has been used to launder $7 billion in virtual money since 2019. Security companies say the site was used to launder $100 million from the Harmony Bridge hack and $600 million from Ronin Bridge.
Crypto and privacy advocates have questioned the Dutch agency's decision, claiming that standard payment systems have been used for far more money laundering than this.
The Dutch agency's move is another example of governments' rising concern for so-called crypto mixers worldwide. Another cryptocurrency mixing service, Blender, was sanctioned earlier this year by the Office of Foreign Asset Control.
The Dutch Financial Advanced Cyber Team (FACT) suspects Tornado Cash was used to hide unlawful cash movements, specifically bitcoin thefts (so-called crypto hacks and scams). These included money hacked by a North Korean organization. FACT said that Tornado Cash had generated at least $7 billion since its 2019 introduction.
After US sanctions, Github, Circle, Alchemy, and Infura have erased Tornado Cash accounts. It declined from $16.5 to $13.7, continuing its monthly decline with a seven-day decrease of over 50%.
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The Cryptocurrency Market Adopted Tornado Cash's Open-Source Methodology
After the US Treasury Department fined Tornado Cash's mixing service, the cryptocurrency industry accepted its open-source design.
Tornado Cash is a cryptocurrency mixer that makes tracking crypto wallets difficult. It mixes millions of transactions before sending them to investors' wallets. Crypto investors can't easily track down the final wallet address. A coin gets split into thousands of tiny pieces and delivered to crypto wallets.
The US government discovered that a Lazarus organization is using Tornado Cash to steal $455 million. It helped steal $96 million in the Harmony Bridge heist and $7.8 million in the Normad theft. Tornado Cash failed to implement rigorous safeguards to prevent cyber criminals from laundering money through cryptocurrencies.
The US Treasury Department took vigorous action against the perpetrators to stop the money laundering scheme. Investors and analysts agree a cryptocurrency mixer ban can be destructive.
The Treasury has been criticized for banning Tornado Cash, a popular crypto wallet. Suspension removed the open-source mechanism from GitHub. Smart contracts are implemented in Ethereum's blockchain via a decentralized system. This has caused issues in the bitcoin industry, with some arguing the government is overstepping its bounds.
Tornado Cash can easily copy and run the open source technology, but fighting the US authorities is too hazardous. Despite being a decentralized system without a central power, many governments impose rules and restrictions on the bitcoin market.
Related Article: Tornado Cash Banned by US Treasury Following Links to Crypto Money Laundering, Cybercrime
