U.S. Department of the Treasury Arrest and Sanction of Tornado Cash Co-Founder

Treasury Department arrests and sanctions Tornado Cash co-founder

Organize | Wu Shuo Blockchain

The US Treasury Department announced a new SDN sanctions list from OFAC on August 23, including the co-founder of Tornado Cash, Roman Semenov. The announcement shows that he is of Russian nationality, residing in Dubai, and lists his 8 Ethereum addresses.

Email address

[email protected];

Alternate email address

[email protected];

[email protected];[email protected];

Cryptocurrency address:

ETH 0xdcbEfFBECcE100cCE9E4b153C4e15cB885643193;

Alternate cryptocurrency address:

ETH 0x5f48c2a71b2cc96e3f0ccae4e39318ff0dc375b2;

ETH 0x5a7a51bfb49f190e5a6060a5bc6052ac14a3b59f;

ETH 0xed6e0a7e4ac94d976eebfb82ccf777a3c6bad921;

ETH 0x797d7ae72ebddcdea2a346c1834e04d1f8df102b;

ETH 0x931546D9e66836AbF687d2bc64B30407bAc8C568;

ETH 0x43fa21d92141BA9db43052492E0DeEE5aa5f0A93;

ETH 0x6be0ae71e6c41f2f9d0d1a3b8d0f75e6f6a0b46e;

The announcement cites the regulations as: secondary sanctions risk, Section 510.201 and 510.210 of the Korean Sanctions Regulations, prohibition of transactions by individuals owned or controlled by US financial institutions.

Below is the translation of the original US Treasury Department press release:

On August 23, the Office of Foreign Assets Control (OFAC) of the US Treasury Department imposed sanctions on Roman Semenov, one of the co-founders of the virtual currency mixer Tornado Cash, for providing material support to Tornado Cash and the Lazarus Group, a state-sponsored hacking organization supported by North Korea. Since its creation in 2019, Tornado Cash has been used for money laundering by criminals, including to cover up hundreds of millions of dollars in virtual currency stolen by the Lazarus Group hackers.

This sanction decision was carried out in coordination with the Department of Justice (DOJ) of the United States, which today filed a lawsuit against Semenov and the second co-founder of Tornado Cash, Roman Storm, who was arrested today by the Federal Bureau of Investigation and the Criminal Investigations Division of the Internal Revenue Service. The DOJ charges Semenov and Storm with conspiracy to launder money, conspiracy to operate an unlicensed money transmission business, and conspiracy to violate sanctions regulations. The third co-founder of Tornado Cash, Alexey Pertsev, was arrested in the Netherlands in August 2022 by Dutch law enforcement authorities on charges related to money laundering.

The Lazarus Group was sanctioned by the United States in 2019. In March 2022, they launched an attack on the Ronin cross-chain bridge of Axie Infinity, using Tornado Cash to hide the flow of stolen funds amounting to over $455 million. This is the largest known virtual currency theft case to date. Subsequently, the Lazarus Group used Tornado Cash to launder more than $96 million stolen in a network attack on Harmony’s Horizon bridge on June 24, 2022, as well as at least $7.8 million stolen in the Nomad theft case on August 2, 2022. This income provided resources for North Korea’s illegal ballistic missile and nuclear weapons programs.

Wally Adeyemo, the Deputy Secretary of the U.S. Department of the Treasury, said, “Even after knowing that the Lazarus Group laundered hundreds of millions of dollars worth of stolen virtual currency for North Korea through their mixing service, the founders of Tornado Cash continued to develop and promote the service without taking substantive measures to reduce its use for illegal purposes.” “Today’s actions by the Criminal Investigation Division of the IRS and OFAC demonstrate that the Treasury Department is committed to continuing to pursue those who recklessly operate and support dangerous virtual currency mixing services that threaten our national security.”

Today’s charges and indictments build on earlier actions, revealing elements of the virtual currency ecosystem used by the Lazarus Group to conceal the sources and destinations of their illicit activities. It also highlights the Treasury Department’s commitment to protecting the integrity of our financial system, including the virtual currency ecosystem, and disrupting the regime in North Korea’s ability to raise funds through illegal activities.

In 2022, OFAC sanctioned Tornado Cash and Blender.io, both of which provided mixing services to the Lazarus Group. This year, OFAC sanctioned two over-the-counter virtual currency traders who facilitated the conversion of stolen virtual currency into fiat currency, providing services to North Korean actors working with the Lazarus Group. Tomorrow, the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department will host a FinCEN Exchange focused on countering North Korea’s abuse of the digital ecosystem, which will include representatives from the Treasury Department, law enforcement agencies, and the financial sector. The Treasury Department will continue to use all of its tools to address North Korea’s illicit financial threats in cyberspace.

Roman Semenov: Key Developer of Tornado Cash

Roman Semenov, a Russian citizen, co-founded Tornado Cash as a mixing service to enhance the anonymity of user transactions. Semenov actively promoted Tornado Cash in the media and online platforms and provided advice to Tornado Cash users on how to make transactions anonymous. Despite being warned that Tornado Cash was being used to launder large amounts of stolen virtual currency for the Lazarus Group, he and his partners continued to maintain the infrastructure supporting the Tornado Cash service and took measures to increase the anonymity of the Tornado Cash service, without taking appropriate action to address the known illegal use by North Korea.

In April 2022, Shemyanov learned about an Ethereum address publicly attributed to the Lazarus Group and listed on the Specially Designated Nationals and Blocked Persons List (SDN List), which contained stolen funds worth $620 million Ronin and was being sent through the Tornado Cash service. Shemyanov and his partners established a front-end sanction screening service, but they knew it was easy to evade and did not take sufficient measures to address North Korea’s active abuse. Despite having information from publicly available blockchain analysis and media queries, Shemyanov consistently ignored or downplayed evidence of Tornado Cash being used to launder virtual currencies for North Korea and continued to participate in the operation and maintenance of the Tornado Cash service, without taking meaningful action to prevent or mitigate the risks of using Tornado Cash to launder proceeds of illegal activities, even after subsequent well-known theft incidents.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the Lazarus Group on September 13, 2019, pursuant to Executive Order (E.O.) 13722 and designated it as an agency, instrumentality, or controlled entity of the North Korean government. The Lazarus Group has been operating for over 10 years and has stolen over $2 billion worth of digital assets in multiple thefts. Due to strong U.S. and United Nations sanctions pressure, North Korea has resorted to illicit means, such as cyber-enabled thefts perpetrated by the Lazarus Group, to raise funds for its illegal weapons of mass destruction and ballistic missile programs.

Shemyanov was designated for sanctions pursuant to E.O. 13694, as amended by E.O. 13757, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to, any activity described in subparagraph (a)(ii) or (a)(iii)(A) of E.O. 13694, as amended, or to any person whose property and property interests are blocked pursuant to E.O. 13694, as amended; and for having materially assisted, sponsored, or provided financial, material, or technological support for the Government of North Korea, or for any person whose property and property interests are blocked pursuant to E.O. 13722, or for providing goods or services.

Sanctions Implications

As a result of today’s action, all property and interests in property of the designated individuals that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons.

In addition, individuals who engage in certain transactions with the designated individuals identified today may themselves be exposed to designation risks.

The power and integrity of sanctions come not only from the ability of OFAC to designate and add individuals to the List of Specially Designated Nationals and Blocked Persons (SDN List), but also from OFAC’s willingness to remove individuals from the SDN List according to the law. The ultimate goal of sanctions is not punishment, but to bring about positive change in behavior. For information on the process of seeking removal from OFAC’s lists (including the SDN List), please refer to OFAC’s Frequently Asked Questions 897. For detailed procedures on submitting a request for removal from OFAC’s sanctions list, please consult OFAC’s website.

Original Link: