Two co-founders of the widely known cryptocurrency mixer platform Tornado Cash have been charged by U.S. prosecutors for their involvement in helping launder more than $1 billion worth of cryptocurrency in criminal proceeds for hackers linked to the North Korean government.
U.S. Government Arrest Tornado Cash Founders For Facilitating Money Laundering
According to an indictment unsealed on Wednesday, the Department of Justice has filed charges in the Manhattan federal court against Washington state native Roman Storm and his Russian business partner Roman Semenov.
The two co-founders are accused of committing money laundering and violating sanctions through their crypto payments business that allegedly helped the Lazarus Group – a hacking organization that is known to exploit crypto and financial services agencies and steal their funds to support North Korea’s weapons programs.
Federal prosecutors say both men who publicized their unlicensed money-transmitting business as a privacy-focused financial service were fully aware of the illegal activity that was taking place on their platform and were willingly helping criminals hide stolen crypto.
Crypto mixers are privacy-oriented services that are meant to hide the trail of ownership of cryptocurrencies that pass through them.
The Third Co-founder was Arrested Last Year
The indictment comes exactly a year after the U.S. government sanctioned Tornado Cash and arrested its third co-founder, Alexey Pertsev, in the Netherlands for alleged money laundering in relation to the token mixing service.
Pertsev, who was released after spending nine months in prison, is still awaiting trial for the charges imposed against him.
Prosecutors Allege Tornado Cash Advised Users on How to Hide Transactions
Storm, Semenov, and Pertsev launched Tornado Cash in 2019 after receiving a $900,000 investment from an undisclosed California-based venture capital firm.
Initially, the group had suggested that they adhere the platform’s users to federal anti-money laundering (AML) and know-your-customer (KYC) rules, only for the idea to be dismissed by investors at the VC firm who said it was unlikely that the fund would use a “compliant mixer”, read the indictment document.
Storm, who according to his lawyer was cooperating with authorities in their investigation against Tornado Cash and the Lazarus Group, was arrested by the FBI and IRS because he helped develop software for the platform that was used by bad actors to conduct illicit activities. Soon after, he was granted bail and released.
Semanov Believed to be in the Middle East
Meanwhile, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Semenov for allegedly providing material support to both Tornado Cash and Lazarus Group.
The federal agency claims that the notorious hacking group used the crypto mixing protocol as part of its efforts to financially support North Korea’s ballistic missile and nuclear weapons programs.
The Russian national is currently residing in Dubai and chances are that authorities will issue an international arrest warrant for his extradition to the United States.
The indictment also alleges that Semenov and Storm had created a document named “Tips to Remain Anonymous”, which advised Tornado Cash customers to use the Tor network or VPN to access the platform, gave tips to delete their web data, and suggested leaving their crypto on Tornado for longer periods to obscure their transactions. The duo also recommended users use different IP addresses when depositing and withdrawing funds.
North Korean Hackers Believed to Have Stolen Over $2 Billion in Crypto Since 2018
According to data compiled by cybersecurity analysts, Lazarus Group has been linked with 30 different cyber attacks on blockchain networks and crypto exchanges since 2018, which has resulted in more than $2 billion in cryptocurrency being stolen.
Federal prosecutors claim the sanctioned hacker group laundered more than $1 billion in illegal proceeds through Tornado Cash, which includes assets from the hacks that took place on the Ronin Network, Harmony cross-chain bridge, Alphapo wallet, and Nomad, to name a few.
If convicted for their crimes, Semanov and Storm could face up to 20 years in prison.
