Tornado Cash Software Developer Arrested By Dutch Police After U.S. Sanctions

The Dutch government agency in charge of investigating financial crimes on Friday announced the arrest of a person suspected of being a developer of the US-sanctioned crypto mixing service Tornado Cash, which has shocked some crypto and privacy advocates.

The 29-year-old man is “suspected of concealing criminal financial flows and facilitating money laundering” through the service, according to the Dutch Fiscal Information and Investigation Service (FIOD).

FIOD did not reveal the Tornado Cash engineer’s name, but The Block identified him as Alexey Pertsev, quoting confirmation from his wife. “My husband did nothing wrong,” she was quoted as saying.

According to FIOD, “Tornado Cash has been used to conceal large-scale criminal money flows, including from (online) cryptocurrency thefts (so-called crypto hacks and scams”

At least $1.5 billion in proceeds of crime such as ransomware, hacks, and fraud have been laundered through Tornado Cash to date, analytics platform Elliptic told TechCrunch earlier this week.

The agency, which opened an investigation into Tornado Cash in June 2022, also hinted that more arrests could be made. It also claimed that the people behind the entire organization profited handsomely from facilitating these illegal transactions.

Tornado Cash was sanctioned by the US government earlier this week, following, for playing a key role in assisting organized criminal gangs in laundering the proceeds of crimes such as cryptocurrency and ransomware hacks.

The platform conceals the trail back to the asset’s original source by pooling and scrambling multiple digital assets from thousands of addresses, including potentially fraudulently acquired funds and legitimately obtained funds, offering illegal actors a chance to obscure the origin of the stolen money.

The latest developments, if anything, highlight the increasing scrutiny of cryptocurrency mixing services for what is perceived to be a mechanism for cashing out ill-gotten cryptocurrencies.

This includes the cash-strapped North Korean regime, which has been documented to rely on cryptocurrency cyberattacks to steal virtual funds and evade economic and trade sanctions imposed on the country.

North Korean hackers stole $625 million in cryptocurrency from Axie’s Infinity Ronin Network earlier this year, making it one of the largest blockchain thefts in history. According to Elliptic, another $100 million was stolen from Harmony Bridge, with evidence that 98% of those funds were later embezzled through Tornado Cash.

As a result, the decision to blocklist Tornado Cash is seen as an attempt by the US authorities to react to North Korea’s use of cyber warfare against crypto exchanges and services to fund its strategic goals.

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