Tornado Cash founders accused of aiding North Korean hackers and money laundering.

Two of the three ‌founders of cryptocurrency mixing service Tornado Cash were charged by the Department of Justice (DOJ) on Aug. 23 for allegedly facilitating‍ hackers ⁤and fraudsters to launder ‌more ​than $1 ⁤billion.

Roman Storm, from Washington state, and Roman Semenov, a Russian native, ⁣were charged ⁤with conspiracy to commit money laundering, conspiracy to commit sanctions violations,⁣ and conspiracy to ‌operate an unlicensed money-transmitting business.

Mr. Storm was arrested in the state‍ of Washington and ⁢was scheduled ‌to appear before the Western District of‌ Washington on Wednesday, according to the DOJ. Mr. Semenov remains at large and ⁢is believed to be in Dubai, The ​Associated Press reported.

According to prosecutors, from at least 2019 until August 2022, Mr. Storm and Mr. Semenov developed,‌ marketed, and operated the cryptocurrency mixing service Tornado Cash, which was able to mix cryptocurrencies together, thus​ concealing​ the origin or ‌destination of the payment and allowing users to carry out anonymous financial transactions.

Although the⁣ service ⁢was used by many as a legitimate way to⁢ protect their privacy, prosecutors allege that Mr. Storm​ and ‍Mr. Semenov were ‌aware that​ Tornado ⁢Cash ⁣was also ‍regularly ⁢being ⁣used as a “safe haven”‌ for criminals ‌to​ engage in large-scale money laundering and sanctions evasion.

Specifically, the DOJ‍ alleged the two company founders were aware that between April and May of last year, U.S.-sanctioned North Korean hacking ⁤group Lazarus‌ was using Tornado Cash to send and receive millions of dollars ⁤in ⁤hacking proceeds.

$1 Billion ⁢in Money Laundering Transactions

“Storm and ⁢Semenov ⁤allegedly knew that the ⁣Tornado Cash service they were operating was engaging in these sanctions-violating transactions,”⁣ prosecutors said. “They⁣ implemented a ⁣change in ‌the⁣ service so they could make a⁤ public announcement‌ that they were compliant with sanctions, but in their ‍private chats they agreed that ⁣this‍ change would be ineffective.”

“They then continued to operate the Tornado Cash service and ⁤facilitate ⁢hundreds of ⁣millions⁤ of ⁣dollars in further sanctions-violating transactions, helping the Lazarus Group ‍to transfer criminal proceeds from a cryptocurrency wallet that had been designated ⁢by the Office of Foreign Assets Control (OFAC) as blocked property,” prosecutors said.

The DOJ further accused Mr.​ Storm and Mr. Semenov of having failed to ⁣implement know-your-customer or anti-money laundering programs as ‍required by law, which allowed ‍criminals to‍ launder billions in funds through Tornado‌ Cash, despite regularly receiving complaints and requests for help from‌ victims⁤ of ‍hacking and ⁤other ‌cybercrime.

Overall, Tornado Cash, according to the DOJ, facilitated more than ‌$1‍ billion in money laundering transactions.

‘Neither Untraceable Nor ⁤Anonymous’

Tornado Cash was sanctioned in August 2022 by ⁢the Treasury ‍Department’s⁤ Office of Foreign Assets Control (OFAC) which said the mixing service had been used to ⁣launder more than $7 billion worth of virtual currency since its ⁣creation in 2019.

The government⁤ later issued guidance⁢ for ​users who were using ⁣the service for lawful⁤ transactions to lawfully withdraw their⁤ funds.

“These charges should serve as yet another warning to those who think⁢ they can turn ⁤to cryptocurrency⁢ to conceal their crimes and hide‍ their identities, including cryptocurrency mixers: it does not matter how‌ sophisticated your scheme is or how​ many attempts you have made to‌ anonymize yourself, the Justice ‍Department will find you.