US Treasury imposes sanctions on crypto mixers” for alleged money laundering

The US has imposed sanctions on a crypto “mixing service” that allegedly laundered more than $7 billion over the past three years and helped North Korean state hackers evade US penalties.

The Treasury Department said Monday that Tornado Cash has been regularly used by malicious cyber actors since its inception in 2019.

The sum allegedly laundered includes $455 million stolen by state-sponsored North Korean hacker group Lazarus Group in March and $96 million from the Harmony Horizon Bridge hack in June.

The designation by the Office of Foreign Assets Control (Ofac) marks the latest attempt by US regulators to crack down on sanctions evasion using cryptocurrencies.

Authorities are paying close attention to so-called mixers because they obscure the trail of transfers that are normally publicly available on the digital ledgers that underlie cryptocurrencies.

In May, Ofac imposed sanctions on Blender.io, another crypto mixing service, for its role in helping Lazarus launder over $20 million in “illicit proceeds.”

Tornado Cash was also used to move at least another $7.8 million from the Nomad exchange hack last week, Ofac said. Lazarus was sanctioned in the US in 2019.

“This action shows that the U.S. is deadly serious about combating North Korea’s illicit crypto activities and will target actors in the crypto space who facilitate the evasion of North Korean sanctions,” said David Carlisle, vice president of regulatory affairs at blockchain analytics firm Elliptic.

"Despite criminals' efforts to conceal their activities, the US has managed to blacklist one of the most prolific supporters of cybercrime, dealing a serious blow to criminals trying to cash out their funds," he added.

Tornado Cash did not immediately respond to a request for comment.

Earlier this year Tornado Cash tweeted that it used a tool from blockchain analytics firm Chainalysis to block Ofac-sanctioned addresses from accessing the platform.

A senior Treasury Department official said Monday that the designation sends a broader message about the dangers associated with companies like Tornado Cash.

“We believe this action will send a really critical message to the private sector about the risks associated with capitalized mixers,” the Treasury official said, adding that it was “designed to prevent Tornado Cash or any kind of reconstituted versions thereof from continuing to operate.”

“Today’s action is the Treasury Department’s second action against a blender, but it will not be our last,” the official said.

But U.S. officials declined to say where they believed Tornado Cash was based or whether its operations were linked to foreign governments.

The designation also comes in the wake of an executive order signed by President Joe Biden earlier this year that strengthened the U.S. government's ability to crack down on the use of digital assets in illicit finance.

In February, the Treasury Department released a national money laundering risk assessment that called the use of “anonymity-enhancing technologies” like Mixer a “growing trend.”