Two individuals associated with Tornado Cash, a well-known cryptocurrency mixing platform, are facing serious legal allegations related to money laundering and violations of sanctions. Roman Storm and Roman Semenov have been named in a recently revealed indictment, which accuses them of being involved in laundering over $1 billion in illicit proceeds.
Tornado Cash is a widely used cryptocurrency mixer that is recognized for its ability to obscure the origins of funds during transactions. The charges against the two developers link them to their association with this privacy-focused mixer, which allegedly played a role in facilitating substantial amounts of money laundering, including transactions linked to North Korea’s Lazarus Group.
The indictment, revealed on a Wednesday, has been issued by a collaborative effort involving the Federal Bureau of Investigation, the Justice Department, and the Internal Revenue Service’s Criminal Investigation unit. According to this joint action, Storm and Semenov are accused of neglecting legal requirements to implement know-your-customer (KYC) and anti-money laundering programs. Instead, Tornado Cash advertised its service as a means for “untraceable and anonymous financial transactions.”
While Storm has already been arrested by the Department of Justice, Semenov remains at large. The U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) has sanctioned Semenov, along with eight Ethereum addresses believed to be under his control.
In a previous instance, OFAC had imposed sanctions on Tornado Cash after allegations emerged that it was being used by the Lazarus Group to launder funds from various cryptocurrency hacks. U.S. Attorney Damien Williams stated that Tornado Cash and its operators were knowingly involved in money laundering.
Contrarily, Storm’s attorney, Brian Klein from Waymaker LLP, argued that the case is built on a “novel legal theory.” Klein claimed that Storm’s involvement was limited to software development and that the legal implications of the case could affect all software developers.
Klein elaborated, “Mr. Storm has been cooperating with the prosecutors’ investigation since last year and disputes that he engaged in any criminal conduct. There is a lot more to this story that will come out at trial.”
It’s important to note that Tornado Cash has a third founder, Alexey Pertsev, who hasn’t been implicated in this legal action. Nevertheless, Pertsev is already facing legal proceedings in Amsterdam regarding his connection to Tornado Cash.
Although Tornado Cash is legitimately used by individuals to safeguard their privacy in the cryptocurrency market, its anonymity features have also attracted malicious actors. The platform has been linked to several high-profile crypto thefts in 2022, including the $615 million token heist from the Ronin network supporting the Axie Infinity NFT game, as well as a $100 million attack on the U.S. startup Harmony.
The Department of Justice has accused the two founders of intentionally designing Tornado Cash with privacy features that they were aware would be exploited for unlawful activities.
