The Netherlands Crime Agency (FIOD) has arrested a suspected developer of Tornado Cash, a crypto mixing service that is built on Ethereum. A 29-year-old man was arrested in Amsterdam. He is alleged to be involved in concealing criminal financial flows and facilitating money laundering through Tornado Cash.
The FIOD, in a statement, said the suspect is brought before the examining judge and added that multiple arrests are not ruled out. Moreover, the Financial Advanced Cyber Team (FACT) has also started a criminal investigation against Tornado Cash. FACT, as per the statement, suspects that Tornado Cash has been used to conceal large-scale criminal money flows. This includes online thefts of cryptocurrencies (hacks and scams). There are also funds stolen by a hacking group associated with North Korea.
This crackdown follows after the US Treasury Department placed dozens of Tornado Cash addresses on the list of sanctions by the Office of Foreign Asset Control (OFAC) on August 8. As such, Circle – the issuer of stablecoin USD Coin froze 75,000 USDC linked to OFAC-sanctioned addresses. Jeremy Allaire, the Circle CEO, tweeted that it’s likely that nearly all responsible registered Virtual Asset Service Providers took steps to block customers from transacting with these addresses or face charges of deliberately avoiding US sanctions compliance rules.
The sanctions have made it illegal for any US persons and entities to interact with Tornado Cash’s smart contract addresses. Individuals and entities caught doing so can face penalties of $50,000 – $10,000,000, as well as 10 to 30 years imprisonment. Analysts believe sanctions could hinder Tornado Cash’s growth by discouraging users and major crypto exchanges that are reluctant to trade on a blacklisted platform. It will reduce the number of funds flowing in and out of Tornado Cash.
However, as soon as sanctions were announced some users tried to exploit perceived shortcomings in the government’s effort. They thought funds can still be transferred out of cryptocurrency wallets on the platform, and its software codes used for transactions can be reproduced and relaunched elsewhere.