U.S. Sanctions Tornado Cash to 'Stop It Laundering Funds for Malicious Actors'
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U.S. Sanctions Tornado Cash to 'Stop It Laundering Funds for Malicious Actors'

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Treasury Department officials claim the Lazarus Group, which is sponsored by the North Korean state, has used this tool extensively after stealing digital assets.

U.S. Sanctions Tornado Cash to 'Stop It Laundering Funds for Malicious Actors'

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The U.S. has sanctioned Tornado Cash, amid allegations it's been used to launder more than $7 billion worth of cryptocurrencies over the past three years.

Treasury Department officials claim the Lazarus Group, which is sponsored by the North Korean state, has used this tool extensively after stealing digital assets.

According to its estimates, $96 million stolen in the Harmony Bridge hack — and at least $7.8 million taken from the Nomad heist — have also worked its way through Tornado Cash.

Brian E. Nelson, the Under Secretary of the Treasury for Terrorism and Financial Intelligence, said Tornado Cash has been used to launder funds stolen from American citizens, adding:

"Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious actors on a regular basis and without basic measures to address its risks."

Tornado Cash is based on the Ethereum blockchain — and is designed to obfuscate the origin and destination of crypto transactions, as well as who is sending and receiving the funds.

But the U.S. maintains that such virtual currency mixers are a threat to national security.

The sanctions mean that "all property" belonging to Tornado Cash that's based in the U.S. — or owned by American citizens — must now be blocked.

Circle, which issues the USDC stablecoin, has already begun to freeze assets that have been linked to Tornado Cash.

Failing to comply with these sanctions can be severe. The fines for willful noncompliance can be up to $10 million, and offenders could also face up to 30 years behind bars.

And given how up to $437 million is currently held within Tornado Cash's smart contracts, a substantial amount of assets could now end up being frozen.

But some crypto enthusiasts have claimed that the U.S. could be violating the First Amendment, pointing to a court case that concluded that "source code is speech."

Developer Patrick Collins tweeted:

"Tornado Cash Github accounts and codebase have been entirely removed. This is much worse than just sanctioning a website."
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