On August 8, 2022, the U.S. Department of the Treasury prohibited Americans from using Tornado Cash, a cryptocurrency platform, alleging that the service has helped criminals launder over $7 billion worth of cryptocurrencies and calling it a “threat to U.S. national security.”
Although “[t]he ability to operate anonymously is a central tenet of crypto technology[,]” law enforcement can often “follow the money” because “[c]rypto transactions are recorded on publicly viewable ledgers called blockchains[.]” According to The New York Times, platforms like Tornado Cash—a virtual currency “mixer”—are designed to make such tracking harder. “Mixers” receive multiple streams of crypto transactions and “combine them to obscure the origin and destination of the funds.”
The Treasury Department states that although “the purported purpose is to increase privacy, mixers like Tornado are commonly used by illicit actors to launder funds, especially those stolen during significant heists.” According to the Treasury Department, Tornado Cash was used to launder over $455 million stolen by the North Korea-based Lazarus Group, in addition to crypto taken in other heists.
The crypto advocacy group Coin Center issued a statement criticizing the Treasury Department’s actions, arguing that Tornado Cash is a “neutral” tool “that can be put to good or bad uses like any other technology. It is not any specific bad actor who is being sanctioned, but instead it is all Americans who may wish to use this automated tool in order to protect their own privacy while transacting online . . . .”
The New York Times explains that the Tornado Cash sanctions are the “government’s latest effort to rein in the crypto industry, as lawmakers and regulators grow increasingly concerned over the volatility of virtual currencies and their role in facilitating hacking and other crimes.”
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About Katherine M. Lenahan
Katherine M. Lenahan is a Partner in the New York office of Faruqi & Faruqi, LLP and focuses her practice on securities litigation.
Katherine M. Lenahan
Partner at Faruqi & Faruqi, LLP
New York office
Tel: (212) 983-9330
Fax: (212) 983-9331
E-mail: klenahan@faruqilaw.com
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