A suspected Tornado Cash developer has been arrested in the Netherlands days after the US sanctioned the cryptocurrency service for helping cybercriminals launder millions in funds.
On Friday, the Netherlands' Fiscal Information and Investigation Service (FIOD) announced it had arrested a 29-year-old developer for Tornado Cash, which supplied a way for cryptocurrency users to anonymize their Ethereum transactions.
FIOD said the unnamed developer was arrested for his alleged “involvement in concealing criminal financial flows and facilitating money laundering” through Tornado Cash.
The government agency further warned: “Multiple arrests are not ruled out. These advanced technologies, such as decentralized organizations that may facilitate money laundering are receiving extra attention from the FIOD.” In addition, the agency said it launched a criminal investigation into Tornado Cash back in June.
The arrest is sparking alarm and opposition in the cryptocurrency community since it may suggest that anyone who contributed to Tornado Cash could face scrutiny from law enforcement.
Other critics are calling the arrest an “attack on privacy.” The non-profit cryptocurrency advocate Coin Center argues the US sanctions on Tornado Cash go too far and place a “ban on effectively every American’s ability to use a particular open source software tool.”
However, the US says Tornado Cash has been ignoring the illicit activities occurring over the service, which had at least 39,000 users. This includes how suspected North Korean hackers and other cybercriminals tapped Tornado Cash to launder millions stolen from other cryptocurrency blockchains.
Blockchain tracking service Chainanalysis added: “More cryptocurrency is being stolen than ever, and in almost every hack we’ve observed this year, Tornado Cash has received at least some of the stolen funds.”
In response, the US Treasury Department effectively blacklisted Tornado Cash, barring US citizens and residents from making transactions over the site. The same sanctions also ban the US financial system and tech companies from supplying services to Tornado Cash.
Since then, Microsoft’s GitHub has shut down Tornado Cash’s code repositories and the personal code repositories to developers who contributed to the cryptocurrency service. The sanctions seem to have also led to the shutdown of Tornado Cash’s main websites.