FBI Arrests Tornado Cash Co-Founder for Money Laundering to North Korea

On Wednesday, August 23, the US Department of Treasury imposed sanctions on Tornado Cash co-founder for his alleged involvement in money laundering to North Korea. These fresh set of allegations came as the US regulators have been cracking down on the crypto mixer for violating US sanctions.

Roman Semenov, one of the three co-founders of Tornado Cash, has been sanctioned by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). This action is due to his involvement in offering material support to both Tornado Cash and the Lazarus Group, a state-sponsored hacking group linked to the Democratic People’s Republic of Korea (DPRK).

Additionally, the FBI and the IRS also arrested the second co-founder Roman Storm over charges of conspiracy to operate an unlicensed money-transmitting business. The third co-founder Alexey Pertsev faced an arrest last year in the Netherlands, in August 2022.

Tornado Cash, a crypto mixer service, enhances user privacy by blending the source of a transaction before sending it to the intended recipient.

Tornado Cash And Lazarus Group

Despite being aware that the Lazarus Group was utilizing their mixing service to launder substantial amounts of stolen virtual currency on behalf of the Kim regime, the founders of Tornado Cash persisted in advancing and endorsing the service. They deliberately neglected the effective curtailing of its illicit usage, notes the Treasury Department.

“While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes,” US Attorney Damian Williams said in a statement.

In the year 2019, the United States imposed sanctions on the Lazarus Group. This group utilized Tornado Cash as a means to obscure the transfer of more than $455 million, stolen during the March 2022 assault on Axie Infinity’s Ronin network bridge. This incident stands as the most extensive recorded virtual currency theft thus far.

Commenting on Roman Storm’s arrest, his lawyer Brian Klein said that it was not right for the prosecutors to charge Mr. Storm because he helped develop software. “They did so based on a novel legal theory with dangerous implications for all software developers. Mr. Storm has been cooperating with the prosecutors’ investigation since last year and disputes that he engaged in any criminal conduct,” he added.