The US has arrested one of the founders of Tornado Cash, a cryptocurrency “mixing” service that North Korean hackers have been using to launder their ill-gotten gains.
On Wednesday, the Justice Department announced it had arrested 34-year-old US citizen Roman Storm in the state of Washington for running the service, which allegedly laundered over $1 billion in funds, including hundreds millions from North Korean hackers.
“You can’t hide from us behind a keyboard —whether you’re a hacker or facilitator,” said FBI Director Christopher Wray in the announcement. Tornado Cash’s other cofounder, 35-year-old Russian national Roman Semenov, has also been charged with money laundering; he's currently at large, although the Treasury Department has sanctioned him.
Tornado Cash has been facing federal scrutiny after the North Korean hacking group Lazarus was spotted using the service to launder stolen cryptocurrency funds from previous heists. Founded in 2019, Tornado Cash lets users anonymize their Ethereum transactions by mixing the funds with other stockpiles of cryptocurrency. The process can obscure the original source of a cryptocurrency transaction, which made Tornado Cash an appealing tool for cybercriminals looking to cash out.
The Justice Department now claims both cofounders of Tornado Cash turned a blind eye to the illegal activity occurring over the service while making millions. "Storm and Semenov knew about these money laundering transactions and received complaints and requests for help from victims of hacking and other cybercrimes. However, they refused to implement any controls," the Justice Department added. The court indictment contains more details.
The arrest of Storm occurs a year after the Treasury Department sanctioned the cryptocurrency mixer, which prohibited US citizens and businesses from using Tornado Cash. In addition, US banks have also been blocked from facilitating transactions to the cryptocurrency mixer.
As a result, Tornado Cash has been largely disconnected from the mainstream financial and internet ecosystem, although it still operates as a “community” maintained project. In the meantime, both Storm and Semenov face up to 45 years in prison if convicted of the charges, which include violating US sanctions. The third cofounder of Tornado Cash, Russian national Alexey Pertsev, was arrested in August 2022 in Netherlands. He is now awaiting trial.