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Founders of Tornado Cash Accused of Laundering Over $1 Billion, Including Funds for North Korea

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Founders of Tornado Cash Charged with Laundering Over $1 Billion, Including Funds for North Korea

Two founders of Tornado Cash, a well-known Russian cryptocurrency mixer, have been charged with laundering more than $1 billion in criminal proceeds. Roman Storm and Roman Semenov are accused of violating sanctions and using Tornado Cash to launder money, including hundreds of millions of dollars for the Lazarus Group, a North Korean state-backed hacking group. The charges in the indictment include conspiracy to commit money laundering, conspiracy to commit sanctions violations, and conspiracy to operate an unlicensed money transmitting business. Storm has been arrested in Washington state, while Semenov, a Russian national, remains at large. The third co-founder, Alexey Pertsev, is facing trial in Amsterdam for his involvement with Tornado Cash. U.S. Attorney Damian Williams stated that Storm and Semenov knowingly facilitated money laundering, despite publicly claiming to offer a privacy service. The indictment also alleges that they failed to implement required know your customer and anti-money laundering programs, instead advertising untraceable and anonymous financial transactions. The joint action involving the Federal Bureau of Investigation, the Justice Department, and the Internal Revenue Service's Criminal Investigation unit highlights the seriousness of the charges. The Office of Foreign Assets Control had previously banned Americans from using Tornado Cash. While some individuals use Tornado Cash for legitimate privacy protection in the cryptocurrency market, it has also been associated with high-profile crypto heists, including the theft of tokens from Ronin and an attack on U.S. startup Harmony. Blockchain analytics firm Elliptic discovered that at least $1.5 billion in proceeds from ransomware, hacks, and fraud have been laundered through Tornado Cash. The U.S. Treasury has previously estimated that Tornado Cash has been used to launder over $7 billion worth of virtual currency since its launch in 2019. Some blockchain analytics tools have been able to trace funds sent through Tornado Cash, leading to the identification of the source of the funds. In conclusion, the charges against the founders of Tornado Cash highlight the risks associated with cryptocurrency mixing services and their potential use for illicit activities. This serves as a reminder for new businesses in the cryptocurrency space to prioritize compliance with anti-money laundering regulations and to be cautious about partnerships or services that could be linked to criminal activities. The actions taken by law enforcement and regulatory agencies demonstrate their commitment to combating money laundering and protecting the integrity of the financial system.

Implications for New Businesses

The charges against the founders of Tornado Cash underscore the potential pitfalls and risks associated with the cryptocurrency sector, particularly for new businesses operating in this space.

Navigating Regulatory Compliance

New businesses must be vigilant about regulatory compliance, particularly in relation to anti-money laundering regulations. The case of Tornado Cash serves as a stark reminder of the consequences of non-compliance.
Understanding the Crypto Landscape
The use of Tornado Cash for both legitimate privacy protection and illicit activities highlights the complexities of the crypto market. New businesses must understand these nuances to navigate the landscape effectively and responsibly. In conclusion, this "hot take" emphasizes the importance of regulatory compliance and understanding the complexities of the crypto market for new businesses. The case of Tornado Cash serves as a cautionary tale, demonstrating the potential risks and consequences of non-compliance. As such, new businesses in the crypto sector must prioritize regulatory compliance and maintain a clear understanding of the market landscape to ensure their operations are both legal and ethical.
Story First Published at: https://www.cnbc.com/2023/08/23/tornado-cash-founders-charged-with-laundering-more-than-1-billion-including-millions-for-north-korea.html
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